Higher global sugar prices on the cards ?

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Right from climate risks concluding to constitute a significant global trade challenge at one end, and increasing biofuel capacities at another along with impulsive reactions from the energy market and various factors from around the major global sugar players are making the world swing in volatility.

In a recent conversation with ChiniMandi News, Mr. Bruno Conte de Lima, Senior Consultant in Risk Management and Head of the Sugar and Ethanol department at StoneX, a North American commodity and financial services consultancy shared his views on various aspects of the sugar industry.

Speaking on the global sugar outlook how he sees market taking shape in terms of exports, consumption and other aspects that may substantially bring dramatic changes in the market in the near future Bruno said, “As per our most recent estimate, we’re going for the coming year to another S&D deficit of 1 million tonnes, after a 3.4 mmt deficit in 2020/21 and 2.5 mmt deficit in 2019/20. Of course production reduction had the major part, but consumption also helped, since the slowdown expected by the Covid pandemic did not impact as much as projected. We think consumption will rise 0.9% from 20/21 to 21/22, after having also risen 0.6% from 19/20 to 20/21.

In terms of exports, India filled an important space that used to be Brazilian and Thailand territory. We expect Thailand to recover production in 2.4 mmt compared to this cycle, which would make them recover some of that market. But with possibilities of Brazil just marginally recovering and more regions coming from exporters to importers – like the European Union – the world will continue to be dependent on India exports.”

“Besides Brazil, of course India will be important to be looking at, especially if the export subsidy will come to incentivize their sugar to hit the market. As for ethanol there, I think it won’t have a huge impact in the near future, maybe after 2023, if the current policy is implemented. Finally, Thailand is one that we definitely have to have our eyes on. Currently we project a 10 mmt of sugar production for 2021/22, from 7.4 mmt in 2020/21. However, some rumors already show that it could be close to 11 mmt, maybe more, given monsoons there are good. This could put more sugar in the market from an origin usually competitive, putting further pressure on prices.

As per our most recent estimate, we’re going for the coming year to another S&D deficit of 1 million tonnes, after a 3.4 mmt deficit in 2020/21 and 2.5 mmt deficit in 2019/20.” He further added.

The Indian Sugar industry has been in focus with its current uptrend in domestic sugar prices, export numbers and emphasis on ethanol blending program. Commenting on how India is seen in the coming 2-3 years Bruno shared, “The ethanol program is very important to follow, but also very bold as of now, in my view, given the big production increment necessary, plus infrastructure. This will be key to determine if India will continue to be a solid exporter or not. Furthermore, the subsidy scheme is crucial for exports to keep on going, which depends on the government and cannot give the market a predictability regarding export supply. I also believe that, as long as weather permits, India will consolidate its production above 30 mmt of sugar.”

On being asked what level he sees sugar prices in the upcoming year he answered, “I think we should still see supportive prices going forward, especially given our view of a third deficit year. Demand seems to be picking up with the strengthening of physical premium, white premium in the whites and a more resilient 2022 and 2023 contract move in NY. Also, the Center-South Brazil 2022/23 crop is still in jeopardy due to all the adverse weather events we had this year, so sugar availability will still be limited. An 17-19 c/lb range for 2022/23, depending on where BRL trades, makes sense for me.”

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