Raw sugar prices in the global market have currently dropped from their 11-year peak ofnearlyr 27 cents a pound witnessed last month on funds vacating their long positions and Brazil diverting more cane for sugar.

Prices now could be range-bound in view of these developments, according to industry experts, analysts and traders.

Benchmark raw sugar futures, which dropped nealry five per cent in the past week, are currently quoted at 25.10 cents a pound (₹45,700 a tonne) on New York’s InterContinental Exchange.

Ethanol support 

According to UNICA, the Brazil Sugarcane Industry Association, sugarcane crushing was 13.6 million tonnes (mt), near expectations. It said wet weather in Brazil was boosting sugar prices at the Intercontinental Exchange in New York.

“Brazil is currently diverting more cane for sugar than ethanol. It has pulled down prices and supplies are expected to improve,” said Praful Vithalani, Chairman, All India Sugar Traders Association.

Last month, sugar prices had galloped to an 11-year high on lower-than-expected production from India, Thailand, China and the European Union.

Global research and data firm BMI said sugar prices are also being supported by the continued diversion of sugarcane towards ethanol production in India.

Brazilian mills speed up Ops

India’s sugar production was initially estimated to be a record of 36.5 mt but unseasonal rains during October affected the crop in Maharashtra and Karnataka. Currently, sugar output is estimated at about 32.5 mt by various bodies against 35.8 mt produced last season. 

This season, at least four mt of sugar output is estimated to be diverted to ethanol production.

UNICA said Brazilian sugar mills were speeding up operations with 165 units operating against 84 during the same period a year ago. 

According to the UK-based Marex group, a diversified global financial services platform, crops in 2023 have been disappointing everywhere except Brazil. 

Brazil has not provided “enough relief” and supply remains tight. “There are severe risks that it will get tighter – if El Nino comes, or logistics play havoc with Brazilian sugar shipments,” it said in its weekly report in the first week of April. 

Need for dramatic change

However, it sees the present tightness as a temporary event in a “basically balanced market”, which will be resolved by a bit of a rise in price and a return to more normal weather.

Rahil Shaikh, Managing Director, MEIR Commodities India Pvt Ltd, said this year’s sugarcane crop may be similar to last year’s but supplies will depend on how much of sugar is diverted to ethanol production.

Marex said only a dramatic change in domestic prices across the world can stimulate production. It said next season India might not be able to export even the 6 mt it exported this season (October 2022-September 2023) in view of low stocks, rising consumption and diversion to ethanol.

Other industry and trade experts such as Indian Sugar Mills Association President Aditya  Jhunjhunwala and Vithalani said it is too early to think about India’s production for next season.

Too late to hike planting

“India’s domestic consumption could be 27.5 mt and diversion to ethanol could be 5 mt. So any exports will be allowed over and above 32.5 mt,” Jhunjhunwala said. 

Shaikh said the Centre might wait for a clear picture on sugar production before allowing exports the next season. “The government could take its time to assess the production and permit exports in January,” he said.  

Marex said production in Thailand could be hit as it was facing a dry period since November and high prices for cassava could mean sugarcane acreage will be lower. 

The UK-based firm said it is too late to increase sugarcane planting in the northern hemisphere while new planting will begin soon in the southern hemisphere. This would mean new production will arrive only after 18 months.  

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