DURING 2019/20 INDIA HAD TO GO TO THE MARKET BUT EARLY IN THE YEAR IT WAS EASIER (PRICES ABOVE 14 CTS). DURING 2020/21 THE MARKET MAY HAVE TO GO TO INDIA AND THEY ARE REALLY TAKING THEIR TIME!
Due to high cash premiums out of Thailand and lower freight rates, Brazil managed to re-conquer market share amongst some Asian Markets, like Malaysia and Indonesia, besides stronger exports to China. The volume of white sugars filtering into China reduced dramatically and opened up space for local Refineries to increase their Raw Sugar demands.
The next Brazilian sugar production is unlikely going to match this year’s given the very good ATR and speedy harvest we just had.
When it comes to Sugar exports, depending on the next Thai crop, exportable surplus may drop 4 mln m/t. CIS/EU may lose 1,5/2 mln m/t of exports. America will be at best the same but Mexico may try to increase exports, given the better crop and higher World Market prices. The nett result would mean about 5/5,5 mln m/t drop in exportable surplus, which needs to be met by de-stocking and greater exports from elsewhere.
At this stage most of the exportable surplus are in India. Until we know what India will do (exportable volume) and how (“help” and how much) the market is thin of sellers and we have a “temporary” trade deficit.
During 2019/20 India had to go to the market but early in the year it was easier (prices above 14 cts). During 2020/21 the market may have to go to India and they are really taking their time! The latest rumours are for 5,000 to 7,000 subsidies for 5 or 6 or even 7 mln m/t. We are still on the camp of low “incentives” for 6 mln m/t.
The MSP was/is expected to rise to INR 33,000 +/- equivalent to US$ 483 fob. Based on the higher cane price, the cost of production stands at INR 28243 equivalent to US$ 417 per m/t. The domestic market seems around INR 32000 equivalent to US$ 467.
Given the stronger inverse market, the message to World Sugar Producers is loud and clear, intensify sales for nearby shipments if you can! Certainly, the market is not paying for sugars to be carried forward.
THE NEXT BRAZILIAN SUGAR PRODUCTION IS UNLIKELY GOING TO MATCH THIS YEAR’S GIVEN THE VERY GOOD ATR AND SPEEDY HARVEST WE JUST HAD.
World Sugar S&D: Our revised sugar consumption for April/March 2019/20 shows a gain of 0,31% and for April/March 2020/21 the drop in demand may be limited to 0,76%. This is an ongoing exercise!
The weather hasn’t been too kind to some European/ CIS Nations (Beet growers) since March. In the past few months, we have seen a drop in Agri yields in some EU and CIS countries. The EU crop is estimated at around 16 mln m/t, a drop of 1,3 mln m/t. The EU will export less and may import a bit more. The CIS is also going to disappoint with lower acreage and lower Agri yields. Russia may drop to 5,2 mln m/t from 7,8 mln m/t and Ukraine down to 1,2 mln m/t from 1,5 mln m/t. Belarus is expected to be under 700k m/t from 830k m/t, so the CIS may end producing 3 mln m/t less. CIS will not export much and may import a bit.
Thailand manged to reduce their stocks greatly and it is likely the coming crop will be less so we expect the exportable surplus to drop as much as 4 mln m/t. Australia will have a similar crop and exports are stronger, so far, so the carryover will be minimum. In the West the USA is expected to have a much large Beet crop and a slightly better Cane crop resulting on an increase of 773k mln m/t R.V. and Mexico will also be higher by about 712k m/t. US will import less and Mexico may export more.
At this stage we estimated the Sugar S&D for April/ March 2019/20 in 11 mln m/t deficit and Oct/Sept 2019/20 a deficit of 1 mln m/t. Based on the current scenario, we expect the Sugar S&D for April/March 2020/21 at 1,9 mln m/t surplus and potentially a 3 mln m/t deficit for Oct20/Sept21, all going well.
We estimate that Producers are 26 mln m/t ahead of Consumers in terms of pricing, with hardly any left for 2020. We estimate producers priced 53% for 2021, 12% for 2022 and 2% for 2023.
Alberto Peixoto E:
albertopeixoto@apcommodities.london T: +44(0) 7570 714 981
29 | ADMISI - The Ghost In The Machine | Q4 Edition
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