BRAZIL IS HAVING THE BEST TIME At least for the past 20 years or more. In terms of Reais per m/t, sugar prices have never been this high. Despite higher domestic costs, like labour, fertilizers, fuel etc… the nett income for millers is at an all-time high.


Brazil is having higher nett income with higher agri yields. The total acreage in 2023 may still be a touch lower than last year, which was the lowest in 10 years, but it seems that it has hit the bottom now.


Higher sugar prices vs. ethanol and strong Corn Ethanol production are “telling” Brazilian millers to do what they can to produce as much sugar as possible and millers are “listening”, doing what they can to achieve maximum production.


The Brazilian CS sugar mix may end close to 46% of the total ATR (sugar content x cane crushed) produced in 2023/24 and we could see a higher mix for 2024/25.


So, the net result is that Brazil is producing and therefore could export, eventually, as much as 8 mln m/t more than last year, during April 23 / March 24.


Let’s take a quick look backwards. India exported 11.6 mln m/t during Oct 21/Sept 22 and exported about 5 mln m/t less during Oct 22/Sept 23. From October 23 exports are expected to drop to tolled sugars (Raws in Refined out).


Due to a lower trade flow in 2023 and a higher Thailand and Brazil CS sugar production in 2023/24, Thailand and Brazil were able to replace what India didn’t export.


As we go in 2024, excluding Brazil, the rest of the world would have to export, perhaps as much as 8/9 mln m/t less, from Oct 23 to Sept 24, which India would contribute with 6 mln m/t less exports.


The trade flow for 2024 is expected to be similar to 2023, so with less export availability excluding Brazil, to a large degree, consumers will need to put more of their eggs in the Brazilian basket.


SO, WHAT DOES IT TRANSLATE INTO


WHEN COMES TO SUGAR PRICES? Well, it all depends on Specs and Producers to a large degree. We estimated that 60 to 65% of producer pricing for 2024 has taken place. We estimated that consumers remain pricing what they need when they need and need to buy/price for 2024 more than producers.


Specs are carrying on their “books” about 17 mln m/t of nett longs (Funds 5.8 mln m/t, Specs 2.3 mln m/t and Index funds 9 mln m/t, as of the 31st of Oct 23), therefore unless “Specs” sell, there isn’t much selling at a given price.


Producers remain willing to price scale up and despite some “sharp” market corrections, like in June 2023, they seem comfortable with their scale-up pricing strategy.


When we look at the Macro scenario, assuming interest rates peaked, economic weak growth, inflation on the way down and 2 wars ongoing, we don’t expect consumers to change their hand-to- mouth buying attitude, but we also don’t expect producers to panic and carrying on with their plans.


Sugar prices, at this stage, still show upside risk given the S&D (Production vs. Consumption balanced) and reduced exportable availability for the next 6 to 8 months.


We also need to keep reminding ourselves that Mother Nature is still full of surprises and without good weather, we can’t get good crops. There are plenty of signs that the El Nino which seems to have developed, is causing some weather issues and that may carry on for a little longer. Next year we could see normal weather patterns, but what is normal nowadays!


Alberto Peixoto E: albertopeixoto@apcommodities.london T: +44(0) 7570 714 981


WHEN WE LOOK AT THE MACRO SCENARIO, ASSUMING INTEREST RATES PEAKED, ECONOMIC WEAK GROWTH, INFLATION ON THE WAY DOWN AND 2 WARS ONGOING.


11 | ADMISI - The Ghost In The Machine | Q4 Edition 2023


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