Market update summary
- The spot ICE11 raw sugar price peaked at 28.14 cents per pound in November 2023. A weak AUD through October-November 2023 saw forward sugar prices in Aussie dollar terms surge to multi year highs.
- Significant upward revisions to Brazil’s forecast sugarcane crop in late 2023 resulted in a large raw sugar sell-off through December, the spot value of raw sugar dropped 25% through that month.
- Raw sugar has since experienced partial recovery with dry conditions prevailing across Brazil through the wet season, threatening to curtail 2024 sugarcane yields and sugar output.
Centre South Brazil
Brazil commenced 2023 season with a crop estimate of 590-610m tonnes of cane. Thanks to near perfect weather conditions and above average cane yields, estimates were revised higher multiple times throughout the season including in early December 2023 which resulted in a steep fall in sugar prices. The final cane crop came in at a record 646m tonnes and crushing largely concluded in January 2024. Approximately 49% of this cane was used to make sugar which resulted in record sugar production of 42.20m tonnes.
The 2024 crop is not expected to be as large due to below average rainfall across CS Brazil from December-February. Many areas of CS Brazil recorded only 50% of average rainfall through that period. Estimates for the coming crop range from 575-620m tonnes of cane compared to 646m in 2023.
Sugar is currently worth 60% more than ethanol in Brazil, therefore millers have been increasing sugar production capacity during the off season. More than 50% of sugarcane is expected to be used for sugar production in 2024 compared to 49% in 2023, which should keep sugar output high despite a lower forecast cane crop.
India
India began harvesting in October 2023 after a poor monsoon season that included the driest August since records began in 1901. Sugarcane yields were expected to be much lower than the previous season with forecasts for 30m tonnes of sugar production. In response to production concerns the Indian government banned sugar exports for 2024 which further supported sugar prices during the second half of 2023.
The Indian crop has managed to surprise to the upside with sugar production now seen around 31-32m tonnes. Crushing will continue until May. Despite higher production India is not expected to re-enter the export market in 2024 as there are real concerns around the next crop. Rates of cane planting were below average in 2023 due to the dry conditions, this is expected to limit Indian sugar output in 2024/25, perhaps below 30m tonnes. Indian domestic sugar consumption is estimated between 28-29m tonnes per annum.
Thailand
El Nino brought drier than average conditions to Thailand in 2023. The 2023/24 cane crop, commencing harvest in November 2023, was initially forecast at 75m tonnes. Like India, yield pessimism was overblown, Thailand surpassed 75m tonnes of cane crushed in late February and some mills are still operating. The final cane crop is now forecast at 80-82m tonnes of cane. CCS has been lower than usual, just above 10% nationwide resulting in total forecast sugar production of 8.8m tonnes.
Given a favorable wet season (June-September 2024) Thailand is expected to have a bigger crop ready for harvest at the end of 2024. Farmers across Thailand have been switching back to sugarcane in recent times prompted by higher sugar prices. Early estimates are for 90-100m tonnes of cane for the 2024/25 season.
Forecast
The sugar market had been expecting a supply deficit to impact trade flows during the first half of 2024. This did not materialize thanks to larger than expected sugar production for Brazil and Thailand.
Looking forward global supply and demand seem quite balanced through 2024 basis current production forecasts for Brazil. As discussed, Brazil has received well below average rainfall this wet season and cane yields will be lower than in 2023. On the other hand, millers in Brazil have been investing in increased sugar production capacity and will divert more sugarcane to sugar production. Therefore, the market will focus on two key questions in 2024:
- How much lower will Brazilian yields be in 2024 compared to 2023, will the cane crop surpass 600m tonnes?
- Millers turned 49% of sugarcane to sugar production in 2023, how much higher will that percentage climb in 2024? Every 1% of sugarcane equates to roughly 6m tonnes of cane or 700-800k tonnes of sugar!
Sugar prices will be highly influenced by Brazilian crushing data which is released bi-weekly from April. Other influences will include the Asian monsoon which is critical to sugarcane growth in India and Thailand prior to their next harvest seasons commencing late 2024.