Sugar Market

Raw sugar  Short term futures (basis October) moved in the 23-25 cents/lb range for most of August before rallying above 25 cents at the end of the month.  Market sentiment is being pulled in different directions: by the very large ongoing crop in Brazil on the one hand, and the projected trade deficit and the impact of El Nino on the other.

The dry weather in Brazil has been supportive of such a large crop.  A strong pace of harvest and good cane quality in the Centre South is pointing to record production, with 39.5 to 40 million tonnes expected there and sugar stocks are accumulating.

Meanwhile in India, monsoon rains have fallen further behind in several areas.  This, combined with a slow start to the monsoon points to an El Nino effect which does not bode well for either this season’s production or next year’s plantings.  Furthermore, it will impact on the availability for Indian exports in 2023/24 which may not occur at all, thereby potentially leaving a one year 6 million tonne gap in the market which will have to be filled from elsewhere.  However other major producers such as Pakistan, Thailand and Mexico are also experiencing poor rainfall.  Hence all eyes will be on Brazil, particularly if the weather turns unfavourable towards the end of the crop, or export shipping delays occur.

In the EU the impact of virus yellows has been less than in previous years.  Following dry conditions, particularly in the south and east earlier in the summer, the weather has improved and production prospects have been upgraded.  With high prices in the bloc, significant imports can still be expected which will in turn result in exports of the surplus.

Analysts are still projecting a balanced market in 2022/23 (Oct/Sept) with a small deficit forecast of 1-2 million tonnes for 2023/24 and potentially a return to modest surplus in 2024/25 but the latter is too early to call.  Much will depend upon the weather and with El Nino forecast to gain strength in the coming months there is a chance of increasing deficits, notably amongst the northern hemisphere producers.

White sugar  Trade flow projections for white sugar remain tight and demand is firm.  This is sending a signal to export refiners to maximise production and they require premia in the US$ 120-150/tonne range to cover costs.  If weather and other events impact negatively on the raws crops, and hence refining output and exports particularly in the northern hemisphere (notably India), there is a chance that premia may need to stay higher to secure the utilisation of the necessary refining capacity. The current premium (early September) is around US$ 150/tonne and the No. 5 price (basis October) is US$ 730/tonne.

EU  Spot prices in the EU market have remained at very high levels (above Euro 1 000/t ex works, beet belt) which is sufficient to attract all duty free and reduced duty imports.

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