SUGAR IS ENERGY, ONE WAY OR ANOTHER!
When we talk sugar, we talk cane, sugar beet and sugar economics. When we estimate sugar production, we also must estimate the impact of energy prices, demand, and currencies on sugar output. Well, we knew that!
We are heading towards the end of the year with the usual macro issues like inflation, slow or no economic growth in major economies and uncertainties on energy supply and costs especially as is linked to the current Russia/Ukraine situation.
As the Northern Hemisphere heads towards its winter, the consumers consumption mood will be “colder” with less spending power (energy costs/higher interest rates) and may further impact current economic downturn.
SO, WHEN IT COMES TO SUGAR, DOES IT MATTER? Our best-case scenario for April 22 / March 23 puts production at 192,1 mln m/t R.V and consumption at 185,6 mln m/t R.V. Sugar consumption has been partially affected by lower income disposal, COVID (still an issue in some countries like China) with “less going out” and more staying in.
The largest contributors to the sugar surplus are Brazil with similar production or a touch more, India also repeating last year’s crop and Thailand producing more. Of course, we could get a few surprises still, like India diverting more “sugar” to Ethanol or Thailand disappointing due to too much rain.
So, as we stand, we see a surplus for April 22 / March 23 of 6,5 mln m/t surplus with some downside, but not much.
As we look into next year, Brazil is expected to have more cane and produce more sugar. We need to watch the weather across the world, especially for Thailand and India, two large exporters, besides Australia and Central America.
It’s too early to say, but in the best case we would have another surplus of 3/5 mln m/t, but depending on the weather we could also swing to a deficit!
THERE IS A MIX OF CONTRIBUTORS TO THE COMING YEAR AND FUEL/POLITICS IS ONE OF THEM Crude production has been less than the current demand with OPEC+ trying to control the supply. Having said that, every so often, “players” are more concerned with what may not be consumed (recession etc..) than what is not produced. China's Zero-Covid policy is still impacting the market, with crude swinging $ 5/10 per barrel and struggling to reach triple digits.
Of course, we need to keep watching the dollar and the US economy (FED, economic indicators etc..), especially against the Brazilian Real but also the India Rupiah, Thai Baht etc…
Brazil has a new President that is likely going to apply “greater” influence on Petrobras fuel pricing mechanism and overall fuel policies. Brazilian economy is still fragile, but recovering. Brazilian economic policies are a greater concern, which will impact fiscal balance and therefore another input to the Real value vs. the dollar. So, depending on crude, therefore gasoline and the Real, Millers in Brazil will be keener or not to produce more sugar from more cane, next year. At this stage, we could see 35 mln m/t being produced next year.
29 | ADMISI - The Ghost In The Machine | Q3 Edition 2022
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