Sugar market. USDA paints a bullish picture for sugar market despite some upward revisions

Despite lowering earlier projections of global sugar exports and raising the volume of ending stocks, the United States Department of Agriculture (USDA) bi-annual outlook on the global sugar market is bullish for the current season (October 2021-September 2022).

In its “Sugar: World Market and Trade” outlook released last week, the USDA projected global sugar exports at 63.11 million tonnes (mt) against its May estimates of 65.95 mt. But it will still be higher than last year’s 62.68 mt.

The USDA projections along with another by Tropical Research Services (TRS), which has projected another year of deficit supplies during the 2022-23 season, should keep spur sugar prices further, if not elevated.

A deficit in 2022-23?

Thomson Reuters reported that TRS had estimated the deficit at 4.04 mt.

The USDA said it had lowered export estimates as Brazil and Thailand are expected to ship 3.1 mt and 445,000 tonnes lower than initial projections.

On the Intercontinental Exchange, New York, raw sugar futures for delivery in March next ended at 19.99 US cents a pound (₹33,030 a tonne) during the weekend. Cash delivery of sugar was also quoted at the same rate. White sugar in London was quoted at $512.60 (₹38,100) a tonne for delivery in March.

Factors that are seen as bullish for the sugar market are: Current estimates of global production being lower than May estimates (181.08 mt vs 185,53 mt), though it is higher than last year’s 180.12 mt; an upward revision on consumption (174.54 mt vs 174.44 mt) and raising import projections (54.22 mt vs 53.63 mt).

Last season’s consumption has been pegged at 171.10 mt, while imports at 55.16 mt.

Though ending stocks have been revised higher at 45.65 mt against previous estimates of 43.97 mt, they are still lower than last season’s 48.75 mt, according to the USDA.

India estimates

The USDA has pegged Indian sugar production unchanged at 34.7 mt from its May projections compared with 33.76 mt last season. “India production is estimated up 3 per cent on higher area,” it said.

Domestic consumption has been pegged at a record 28.5 mt, again unchanged from initial projections but 0.5 mt higher than last season.

However, the USDA has raised India’s export estimates to seven mt from the previous 6 mt. But it would be 0.2 mt lower than last season’s 7.2 mt export.

“Exports are expected to be high even without subsidies that have encouraged exports,” the agency said. Indian sugar mills and exporters have so far signed deals to export 2.1 mt.

Ending stocks are estimated lower at 14.37 mt against earlier projections of 16.57 mt but higher than last season’s 14.17 mt. “Stocks are expected to be up slightly at levels that represent approximately seven months of consumption,” the USDA said.

Market’s concern

While India could be the toast of the global sugar market, Brazil will be its concern. Production in Brazil is expected to drop by 6.1 mt to 36 mt against 42.05 mt. It is also lower than initial projections of 39.9 mt.

“Brazil production is estimated to fall in part as a result of dry conditions and frosts. Due to Brazil’s importance as a producer and exporter, this reduction is expected to have a major influence on world sugar supply and prices,” the USDA said.

Since sugar prices are ruling firm and more attractive than ethanol prices, at least 46 per cent of Brazil’s sugarcane could be processed for sugar and the rest for ethanol. Its exports are expected to drop sharply 26 mt against

As overall sugar prices remain firm and relatively more attractive than ethanol prices, approximately 46 per cent of the sugarcane crop is expected to be processed for sugar and 54 per cent for ethanol, similar to the previous season. Consumption is expected to be down slightly, with stocks unchanged. Exports are estimated to drop sharply on lower available supplies to 26 mt against 32.15 mt last season. In May, the USDA had pegged exports at 29.17 mt.

Other factors

Thailand sugar production is expected to rebound this season to 10 mt from 7.58 mt last season. Yet, it will be lower than initial projections of 10.6 mt. With carryover stocks of over three mt, the South-East Asian nation is expected to export 10 mt against four mt last season.

The USDA has projected higher sugar production in Pakistan and Australia, seeing both nations exporting more than last season. For India, Australia and Thailand, shipments to Indonesia, India’s largest buyer the previous season, is something to contend with, though it is seen doing well in South and West Asia, especially the Gulf region.

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