CropGPT Sugar - Price Down, ISO Predicts Product Down

CropGPT - Sugar

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Large delivery for March NY sugar contract (1.3 MMT, second-largest ever) signals demand issues, pushing prices down.
Brazil's sugar production surged (+1051% y/y to 27,000 MT in early February, +25.6% y/y to 42.158 MMT through mid-February), with a higher percentage for sugar than ethanol production.

International Sugar Organization (ISO) increased its global sugar deficit estimate for 2023/24, boosting prices temporarily.

India and Thalaind sugar1 is expected to fall/ India dropping 15.3% year on year. Thailan is projected to fall by 32% year on year

Overall the USDA forecasts global sugar production to rise +4.7% for 2023/24 but also expects a significant drop in global ending stocks.

ISO - Higher sugar deficit forecast for 2023/24 season

The International Sugar Organization (ISO) on Wednesday increased its projected global sugar deficit for the current 2023/24 season. The intergovernmental body’s quarterly report indicated that the deficit would rise to 689,000 metric tons for the year running from October to September. This figure significantly surpasses the previously forecasted deficit of 335,000 tons, which was projected in their last report released in November 2023.

Interestingly, the ISO’s figures don’t align with predictions from other quarters. A Reuters poll featuring analysts and traders this month provided a median forecast of a small surplus of 500,000 tons for the 2023/24 season, contrasting sharply with the ISO’s deficit forecast.

The ISO report also provided revised statistics for global production and consumption for the 2023/24 season. Overall global production has been lowered to 179.7 million tons, a slight reduction from the initial projected output of 179.9 million tons. Simultaneously, there has been a slightly positive revision to consumption forecasts. The revised figure of 180.4 million tons marking a small increase from the previous estimation of 180.2 million tons.

Remarkably, the ISO’s projections of a notable deficit for the 2023/24 season follow what has been reported as a sugar surplus year. The organization estimated that there was a global surplus of 308,000 tons in the previous 2022/23 season. That current data indicates the sugar market swinging from an excess to a deficit raises important questions about global sugar management and industry dynamics.

The ISO made notable adjustments to its production predictions for major sugar producing countries. Brazilian production for 2023/24 has been increased to 44.52 million tons, up from the earlier forecast of 43.07 million tons. This marks the second consecutive upward revision in Brazil’s production figures, which the ISO report indicates as the primary influence maintaining their neutral price view.

Brazil’s sugar harvest faces threats from unpredictable rainfall in the Centre-South region, which might reduce the harvest volume. Investments in the sugar mix for production have led to uncertainty in estimated outputs, and variable rainfall could affect the trade balance. Although changes in productivity may alter outcomes, Brazil’s sugar production remains influential in the global market, with rainfall and weather patterns like La Niña potentially impacting future prices.

But in contrast to the improving situation in Brazil, the outlook for Thailand, another significant player in the sugar industry, saw a downward trend. The ISO trimmed its anticipation for 2023/24 production to 8.24 million tons, down significantly from the previous estimation of 9.48 million tons.

In Thailand, the government has increased sugar cane prices to 1,197 baht per tonne for the 2022/2023 season and 1,420 baht for the 2023/2024 season, following a settlement with Brazil under the WTO to resolve subsidy disputes.

The Indian sugar industry, specifically in Tamil Nadu, has faced a decline in sugar production by 1 lakh tonnes and currently has 27 operational sugar mills with a reduced recovery rate of 8.90%. This production shortfall, alongside the shut down of three mills, may potentially affect global sugar prices. Similarly, Kenya’s production struggles due to a sugarcane shortage could influence global supply levels.

India has seen a rise in agricultural exports, reflecting a favorable policy environment for global market contributions. The West Indian Sugar Mills Association has encouraged the Indian government to promote sugar diversion for ethanol production in response to increased Fair and Remunerative Price (FRP) for sugarcane aimed at easing financial stress on mills and stabilizing supply.

Indian government policies are being reassessed concerning ethanol production from B-heavy molasses and cane juice, impacting sugar export volumes amid ambitious ethanol blending targets. Bajaj Hindusthan Sugar’s CBG (Compressed Bio Gas) plant initiatives and Balrampur Chini Mills’ foray into polylactic acid manufacturing for bioplastic indicate a diversification that could reduce raw sugar market volumes. Digitalization efforts in India’s sugar sector led by the National Federation of Cooperative Sugar Factories are expected to increase efficiency and global market integration.

In Maharashtra, only five sugar mills have stopped operations this season, and the sugar recovery rate has slightly improved to 9.91%, indicating a lengthier crushing season with more efficient production processes. Despite a dip in total production volume compared to the previous season, Maharashtra’s sugar industry shows positive trends.