Oct 9 / Lívea Coda

Sugar and Ethanol Monthly Report - 2023 10 06

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"The sugar market continues to find support in tightness, with India and Thailand being the main drivers. However, the bullish trend may not be as strong as previously expected, as worsening conditions in other countries such as the USA, Mexico, and Central America have been partially offset by improvements in Europe, Ukraine, and Brazil."

S&D and Trade Flow

Brazilian crop keeps getting bigger and its higher availability contributed positively to trade flows - not surprisingly the October delivery was a record at 2.8Mt. The possibility of another great crop in Center-South in 24/25 and an even higher sugar mix also eased Q2-24 and Q3-24 trade flows.However, the Southern country alone is not enough to offset the Northern Hemisphere absence. Lower availability in India and Thailand is still the strongest bullish factor.

The worsening of other supplier countries' development conditions, such as the US, Mexico and other Central American countries, were partially offset by improvements in Europe, Ukraine and Brazil. Therefore, although there is still room for March to remain supportive, the extent of the bullish trend might be weaker than previously expected.

Image 1: Total Trade Flow ('000t)

Source: hEDGEpoint

Image 2: Raw's Trade Flow ('000t)

Source: hEDGEpoint

Image 3: White's Trade Flow ('000t)

Source: hEDGEpoint

Image 4: Global Supply and Demand Balance (MT RV oct-sep)

Source: hEDGEpoint

Brazil CS

Image 5: Sugar Balance - Brazil CS (Apr-Mar Mt)

Source: Unica, MAPA, SECEX, hEDGEpoint

Our models show that, considering the latest yield results, it is possible to reach a cumulative cane yield of 82.9t/ha by 23/24 end. With a 1.3% increase in area, CS can reach 624.86Mt of cane – which is also in line with weather forecasts. 
Higher feedstock availability also allows for a higher sugar mix, adding 2p.p. to our previous estimate, reaching 48.5%. These changes combined with a 139.7 TRS lead the region to a record sugar production at 40.3Mt.

 Even with a possible drop in TCH during next season, 24/25, the idea of a higher volume of cana bisada and crystallization investments would allow the region to continue supplying over 40Mt.

Image 6: Total Exports - Brazil CS ('000t)

Image 7: Total Stocks - Brazil CS ('000t)

Source: SECEX, Williams, hEDGEpoint

Source: Unica,MAPA, SECEX, Williams, hEDGEpoint

Brazil CS Ethanol

Image 8: Otto Cycle - Brazil CS (M m³)

Source: ANP, Bloomberg, hEDGEpoint

Fuel prices have failed to respond to the international market's recent bullish oil trend, as a result of governments' commitment to lower prices. In turn, this policy has reflected directly in demand, which has been strong.
With increasing feedstock availability (both cane and corn), ethanol has recovered its share at the pump and boosted its domestic sales. However, all this occurred while still losing the battle against sugar.

The increase in sales had little effect on the biofuel price as it is far from harming its availability and stocks.

Image 9: Anhydrous Ending Stocks - Brazil CS ('000 m³)

Image 10: Hydrous Ending Stocks - Brazil CS ('000 m³)

Source: Unica, MAPA, ANP, SECEX, hEDGEpoint

Source: Unica, MAPA, ANP, SECEX, hEDGEpoint

Brazil NNE

Image 11: Sugar Balance - Brazil NNE (Apr-Mar Mt)

Source: MAPA, SECEX, hEDGEpoint

By the end of August, the region had produced 194kt of sugar, according to MAPA. This represents a 31% increase Y/Y and is above the 10y average at 177kt
It is safe to remain optimistic with a marginal increase in production to 3.3Mt and maintenance of 2.3Mt exports.

September has brought abundant rainfall to NNE's key cane-growing regions, surpassing historical averages by over 75%.
Image 12: Total Exports - Brazil NNE ('000t)

Source: SECEX, hEDGEpoint


Image 13: Sugar Balance - India (Oct-Sep Mt)

Source: ISMA,AISTA, hEDGEpoint

There were scarce rains and August faced the worst precipitation in 100 years! But looking at the Standardized Precipitation Index (SPI) for India, it’s possible to observe that key producing states such as Uttar Pradesh, Tamil Nadu, and Gujarat suffered little throughout the whole cane-developing period (Jun- Sep). 
Therefore, we kept our production estimates unchanged.

Considering 31.4Mt, India could have some surplus sugar to export, but with the ethanol blending program, food security worries amid election year, and rising fuel prices, the idea of no exports is indeed likely. India would, in this case, be restocking and a step closer to the usual threshold of 3-month consumption stock.

Image 14: Total Domestic Exports - India ('000t w/o tolling)

Source: ISMA,AISTA, hEDGEpoint


Image 15: Sugar Balance - Thailand (Dec-Nov Mt)

Source: Thai Sgar Millers, Sugarzone, hEDGEpoint

Thailand experienced adverse weather conditions from June to September, with below-average rainfall affecting cane's growth. 
Furthermore, cane area is expected to decrease compared to the previous season due to farmer's growing preference for cassava, which we estimate to pay a premium of about $100 per hectare over cane.

Due to the current and projected weather conditions, we have revised our sugarcane production estimate from 75 to 70 Mt, impacting both production (8.2 Mt) and exports (5.3 Mt).

Image 16: Total Exports - Thailand ('000t)

Source: Thai Sgar Millers, hEDGEpoint

EU 27+UK

Image 17: Sugar Balance - EU 27+UK (Oct-Sep Mt)

Source: EC, Greenpool, hEDGEpoint

The European Commission has updated its sugar production projections for the 2023/2024 season. The EU27's beet sugar production, which includes sugar used in ethanol production, is now anticipated to reach 15.6Mt. This represents a significant increase of 1Mt compared to the 2022/2023 season, which saw production at 14.6Mt.
Considering at least 1Mt diversion to ethanol, but adding UK, our estimate improved by nearly 400kt in 23/24, reaching a net production of 15.5Mt.


Image 18: Sugar Balance - Mexico (Oct-Sep Mt)

Source: Conadesuca, Greenpool, hEDGEpoint

El Niño has affected Mexico’s precipitation occurrences, making weather drier-than-normal during cane key developing stage window – between June and August. While the main producing state might have been spared (Veracruz), Jalisco and San Luis Potosi have suffered more.
For September/October, realized precipitation and forecast improved, allowing us to remain rather optimistic at 5.6Mt. However, if the challenging weather persists, we may anticipate further reductions in this estimate, possibly leading to a 22/23 rerun.

Image 19: Total Exports - Mexico ('000t)

Source: Conadesuca, Greenpool, hEDGEpoint


Image 20: Sugar Balance - US (Oct-Sep Mt)

Source: USDA, hEDGEpoint

For the 22/23 season, some production volume was added, given the larger beet sugar results and high-tier tariff imports. Not only that, but the US’s total use decreased as a reflex of lower human consumption. With higher supply and lower use, stocks rose nearly 300kt, inducing a stock-to- use ratio of 17%.
On the other hand, 23/24 prospects have worsened, and the increase in beginning stocks and beet production is offset by lower Louisiana production and Mexico’s imports. With over 300kt of availability reduction, stock-to-use is expected to drop to 13.5% in 23/24.


Image 21: Sugar Balance - Guatemala (Oct-Sep Mt)

Source: Cengicaña, Sieca, Azucar.gt,Greenpool, hEDGEpoint

No change: Guatemala's rainfall is lagging behind average. Most cane-producing regions (Guatemala's lowlands, central, and highlands) received lower-than-average precipitation. Weather forecasts show different outcomes, while GFS predicts more rains in key producing states, Canadian and European models still peg dryness to come.
It is fair to notice, however, that the country could still recover its production depending on farmers' irrigation choices. The country is well-known to have made major investments in the area.

Image 22: Total Exports - Guatemala ('000t)

Source: Sieca

El Salvador

Image 23: Sugar Balance - El Salvador (Oct-Sep Mt)

Source: Consaa, Sieca, Greenpool, hEDGEpoint

According to the Ministry of Agrarian Policy and Food of Ukraine, the country reached 249 thousand hectares, more than the 220 cultivated in 2021.
Although there was a nearly two-week delay in sowing due to adverse weather and climate conditions, the current sugar beet growing season is progressing quite well. It is still too soon to peg, but the country could go back producing 1.7Mt and exporting up to 600kt.


Image 24:

Source: Ikar, Sugar.ru, Greenpool, hEDGEpoint

There are risks associated with sugar beet processing, including weather-related challenges and issues with fuels and lubricants that add a negative pressure to the 6.4Mt estimate.
The latest data from Soyuzrossakhar, disclosed by sugar.ru, reveals that the current sugar yield as of September 11th is at 13%, which is notably low. To provide context, on September 12th 2022, it was 14.2%, and in 2021, it stood at 13.5%. Estimating the current sugar beet crop at 45.7 million metric tons (accounting for losses), sugar.ru bets on a range between 6.2 and 6.4Mt.


Image 25: Sugar Balance - China (Oct-Sep Mt)

Source: GSMN, CSA, Refinitiv, Greenpool, hEDGEpoint

Obs: stocks also account for bonded warehouses volume and imports include syrup and smuggling estimates

While we expected 365kt to be imported by the country during August, China realized 370kt, meaning we are close to reaching the 3.7Mt imports (excluding syrup and smuggling) expected for 22/23. Sugar exports dropped by 27% so far, while syrup improved by 37% reaching 1.4Mt.
For 23/24, with a possible production recovery to 10Mt, sugar “as such” imports should remain close to average, with increasing participation of syrup – especially if prices remain supportive.

Image 27:

Source: GSMM, hEDGEpoint

Source: CSA, Refinitiv, Greenpool, hEDGEpoint

Weekly Report — Sugar and Ethanol

Written by Lívea Coda
Reviewed by Natália Gandolphi

Sugar and Ethanol Desk

Murilo Mello
Matheus Jacques
Gabriel Oliveira


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