S&P Global Commodity Insights projects a sugar surplus of 4.8 million mt in 2022-23 marketing year

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There have been talks about the global sugar market heading to witness a relatively large surplus in the new marketing year. In a recent conversation with ChiniMandi News, Luciana T. Silveira Soncin – Global Manager, Sugar Analytics at S&P Global Commodity Insights shared insights on the Global Sugar Market Outlook as below:

Larger exporters´ production boom sketching new global sugar surplus in 2022-23
Platts Analytics’ Global Supply and Demand projects a surplus of 4.8 million mt of sugar in the 2022-23 marketing year (October-September). This surplus, if materializes, would be the largest in four years, and comes after a virtually balanced Supply and Demand balance-sheet in 2021-22.

Brazil, Thailand and India bring in more tonnes
The surplus in 2022-23 is premised on a rebound of sugar production in Brazil, in both 2022-23 and 2023-24 national crop years, and in Thailand in 2022-23. We assume Brazil will produce 32.5 million mt in 2022-23 and 34 million mt in 2023-24. Thailand is expected to produce a little more than 11.5 million mt in 2022-23.

India sugar production is expected to set a new record for the second year in a row, reaching 36.1 million mt in 2022-23. This is after diverting 4.1 million mt of sugar to ethanol production. We do not rule out a higher diversion, which could reduce net sugar production, but this should not impact India sugar supply to the world market by much.

We are assuming that India exports in 2022-23 will be limited to nearly 7.0 million mt, while waiting for any definition from the government regarding the next crop’s sugar export policy. However, looking at an availability point of view, India could export more, provided that global sugar prices trade close or above the domestic price parity, estimated at nearly 18 cents/lb today.

In Brazil, despite the adverse weather in 2021 and early 2022 still hindering cane yields in 2022-23, we foresee both cane crush and sugar production higher on the year. Moreover, recent changes on fuel taxes in Brazil, coupled with reductions on gasoline prices by Petrobras, have led the mills to increase the mix towards sugar production.

Adverse weather could bite, but not solve the projected surplus
The increase in sugar production in these countries are largely offsetting cuts in the EU estimate, where production should suffer with the worst drought in recent history, coupled with energy shortage risk in 2022-23. If weather remains dry, as models are projecting, we do not rule out further reductions. Not only in the EU, but also the US and Mexico are having extreme weather episodes, posing further risk to production in these regions. Inflation and increased costs of energy and inputs might also contribute to taking current production estimates down.

While the downside risk in the EU and US/Mexico production intensifies an already tight sugar S&D scenario locally, this will hardly eat the surplus projected in our global S&D in 2022-23. At the same time, the global surplus should not be entirely reflected in the global sugar trade flows, as most of it is concentrated in countries whose exports are policy driven (such as India and Pakistan).

In this scenario, although we project a significant surplus in the 2022-23 global sugar Supply and Demand balance-sheet, we don’t see this pressuring prices much below 18 cents/lb in the medium-term, or at least until the next CS Brazil crop picks up pace, from a fundamental perspective. As recent years showed, export policy in India will likely be a key driver for global sugar prices.

Check more at Sugar Prices, Market News & Analysis | S&P Global Commodity Insights (spglobal.com)

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