Mar 28 / Lívea Coda

Sugar and Ethanol Monthly Report - 2024 03 28

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"Bulls have been battling bears daily, with prices remaining in a tight range and failing to move back above 23c/lb. However, despite this bearish pressure, the market remains on the verge of another deficit year. Demand is expected to remain resilient, especially given the recent price correction. An example of this is China's eagerness to buy sugar every time its prices fall back to the 20.5c/lb level - opening the non-producer region's arbitrage. In addition, lower availability from Brazil is already given, despite its well-known efforts to maximize sugar, while the 24/25 Northern Hemisphere's crop recovery is still highly dependent on weather."

S&D and Trade Flow

At the same time that the market has become more pessimistic regarding the Brazilian CS 24/25 crop season, the Northern Hemisphere's 23/24 prospects have improved, making it easier to remain on the optimistic side for 24/25 in terms of the region's availability. Europe is one of the key regions acting on the bearish side, with higher imports from Ukraine being allowed. The latter is expected to have higher sugar availability given the price advantage of beet over grain, allowing exports of 800 kt to 1 mt in 24/25.

The EU approval of no tariffs on Ukrainian sugar could allow up to 650kt to be imported to the region, pressuring domestic prices and the white contract. As a result, one could expect the EU to be participating more eagerly in the international market. This trend could be seen throughout the rest of 23/24 and into 24/25 (Oct-Sep), as beet area is also expected to increase during the region's new crop.

Therefore, bulls have been battling bears daily, with prices remaining in a tight range and failing to move back above 23c/lb.However, despite this bearish pressure, the market remains on the verge of another deficit year. Demand is expected to remain resilient, especially given the recent price correction. An example of this is China's eagerness to buy sugar every time its prices fall back to the 20.5c/lb level - opening the non-producer region's arbitrage. In addition, lower availability from Brazil is already given, despite its well-known efforts to maximize sugar, while the 24/25 Northern Hemisphere's crop recovery is still highly dependent on weather. 

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

Sugar prices are being supported by ongoing production challenges in the Center-South region, exacerbated by the adverse weather conditions in February, prompting a reevaluation of cane's projections. It's important to note that while soil moisture and cumulative rainfall indicate a potentially sharper decline in yields compared to our current estimates, the impact of the drought was not uniform across the Center-South region. 

Therefore, we believe it is too early to forecast cane volumes below 600 Mt. Despite the return to more typical yields, the 24/25 season is unlikely to be a major failure, remaining within the higher range of cane and sugar production observed in previous years. By analyzing proxy regions, taking into account rainfall patterns, we estimate that approximately 30% of the Center-South's cane production received average rainfall, while 23% experienced below-average levels and roughly 47% recorded minimal levels. Taking all factors into consideration, including historical trends and market forecasts, the Center-South region could see an 8.4% decrease in yield, reverting to a more typical TCH of nearly 79 t/ha and around 605.8Mt of cane.

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

From the beginning of 2024, the Otto Cycle shows usual seasonality. Anhydrous sales, as reported by Unica, have shown an increase during this period. Additionally, sales of hydrous have also picked up since August, surpassing historical averages and maintaining a heightened level. However, despite this positive trend, the increased availability of raw materials has led to a rise in ethanol stocks, contributing to a disappointing price performance. 

There are currently no indications that biofuel poses a threat to sugar production. Therefore, mills should focus on maximizing sweetener production. With prices remaining relatively low, we expect healthy growth in the Otto Cycle for the 2024/2025 period, projected at 2.3%. It's worth noting that this forecast could be considered optimistic, and it could lead to a decrease in stocks closer to the average by the end of the crop season.

This estimation is contingent upon current cane estimates, which stand at 605 million metric tons. Any deterioration in these estimates could exert pressure on prices. As demand has only recently recovered, it remains the most vulnerable aspect of the market. Consequently, if prices increase, ethanol demand would be the first to suffer, particularly considering the artificially low prices of gasoline at the pump.

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

During the summer season, the North and Northeast regions, particularly the latter, have experienced above-average rainfall. This weather pattern has disrupted crushing operations and led to lower sucrose content, resulting in a downgrade of our estimated TRS to 127 kg/t, though still above last season's levels. Despite these challenges, mills have managed to maintain a sugary mix.

In the April-March period, the region has produced 3.2 Mt of sugar, suggesting a potential to nearly reach 3.5 Mt. However, it's worth noting that we have revised our cane availability down to 61 Mt due to the various issues faced by the region between December and the end of February.

Looking ahead to the 24/25 season, recent rains have been beneficial. Therefore, it is possible to maintain optimism and our previous estimate of 63 Mt for cane availability. Although sucrose content may not significantly increase due to continued rainfall, improvements in sugar availability are expected. Mills have invested in crystallization capacity, potentially reaching close to 49% mix, resulting in an estimated sugar production of 3.7 Mt. Therefore, we are also revising our export projections upward to 2.3 Mt.

An important trend to monitor is the expansion of the NNE regions' share in the US Tariff Rate Quota (TRQ). Since the failure of Mexico's crop, the US has allowed the region a larger share of its imports.

Image 12: Total Exports - Brazil NNE ('000t)

Source: SECEX, hEDGEpoint


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

Source: ISMA,AISTA, hEDGEpoint

Recent reassessments by Indian officials have painted a more optimistic picture for the upcoming season. According to AISTA, India is projected to produce approximately 32 Mt of sugar in the 23/24 season, closely aligning with our previous estimates of 31.9 Mt. Not only AISTA, but ISMA has also revisited their figures suggesting total sugar production close to 32.3Mt. 

This upward revision suggests that the country could replenish its sugar stocks by around 3.5Mt and contrasts with the initial market expectations, which estimated production to be under 30 Mt at the season's outset. Despite reports of reduced planting in the southern Indian states for the 24/25 season due to drought conditions, AISTA highlights that sugarcane remains the most profitable crop for the average Indian farmer. Therefore, we remain optimistic.

A modest 2% reduction could be offset by higher yields if weather conditions cooperate, particularly if La Niña's impact proves to be less severe. In such a scenario, India could potentially redirect 5.5Mt of sugar towards its ethanol program without depleting its stock reserves. Subsequently, the decision to export approximately 1Mt or to allocate it to domestic stocks would hinge on prevailing domestic and international price dynamics and government policies. 

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

By the end of February, Thailand had already surpassed expectations by achieving a sugar production of 8 Mt. This figure not only exceeds our initial forecast but also surpasses the market's average expectations. As a result, we are revising our projections upwards. At the current pace of crushing, Thailand could potentially reach a sugar production of 8.5 Mt in the 2023/2024 season.

However, despite the impressive production figures, exports are still lagging. Data up to the end of January indicate a decline of 37% in exports compared to the previous season, totaling only 696 kt. A significant portion of this volume, approximately 350 kt, consisted of refined sugar exports.

Looking ahead to the 2024/2025 season, assuming favorable weather conditions persist, it wouldn't be surprising to see Thailand reach close to 10 Mt of sugar production. In addition, the country is expected to process between 92 to 95 million metric tons of sugarcane, which could lead to a surge in exports.

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

Regarding EU and UK markets, we forecast a recovery in white sugar production, with volumes potentially reaching 15.92 Mt in 23/24, an increase of 9.5% over 22/23. This figure is the result of an increase in beet area, stimulated by higher prices in 2022, and higher yields.

Although the general framework remains positive, area growth in the 24/25 season is expected to be lower, with an increase of only 2-3%. In addition to the weather conditions that have recently delayed planting in many Western EU countries the increase in Ukrainian sugar imports is preventing new acreage investment in the EU as the market expects an increase in supply that could trigger price corrections.

It's worth noting that after the EC removed tariffs on Ukrainian sugar, imports jumped to more than 400kt in 22/23 and could reach up to 650kt in 23/24, at lower prices than the EU domestic sugar. This scenario has already triggered a wave of protests across Europe, particularly from producers in France and Poland. Nevertheless, the EU has extended its temporary free trade agreement with Ukraine until June 2025, albeit with some safeguards for some products, such as sugar, to be implemented from June 2024, which could limit some of these potential imports.


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

Source: Conadesuca, Greenpool, hEDGEpoint

Conadesuca released its 3rd crop estimate downgrading Mexico’s total sugar production from 4.9Mt to 4.7Mt. This reduction not only affects the country's export capacity, but also its need to import. 

Currently, we estimate that Mexico will need to import at least 500kt to keep stocks stable and participate in the global trade flows offering little over 600kt as exports. This is especially worrying for its main trading partner, the US, which has already started re-directing its TRQ.

However, as many other Northern Hemisphere countries, there is a silver lightning. Weather is the key to a recovery in 24/25.

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

Source: Conadesuca, Greenpool, hEDGEpoint


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

Source: USDA, hEDGEpoint

The USDA revised beet production down from their previous report, from 4.8Mt to 4.7Mt (-141kt). This reduction was attributed to warm temperatures between December and January, especially in Michigan and the Red River Valley. 

As a result, part of the sugar beet piles had to be discarded and the situation made pile management more challenging in some regions. Also, the sucrose recovery extraction was reportedly lower from last month, impacting total production estimates directly.

Lower expected imports from Mexico also impacted the total sugar supply. The combination of both, lower production, and availability from the US’ key trading partner, offset the higher raw sugar tariff-rate quota (TRQ). During March, the USDA increased raw sugar TRQ by 125kt, however, the USTR has not yet published the country allocation. The TRQ volume remains unchanged and at record-high levels.


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

Source: Cengicaña, Sieca,,Greenpool, hEDGEpoint

Gualtemala’s production by February’s end reached slightly above 1.5Mt, making it possible for the country to reach the expected 2.4Mt by the end of the season. Compared to 22/23, the 1.5Mt represents a 11% reduction. 
Given the higher white premium seen during the end of 2023, it is not a surprise that the country has focused on white sugar, being the higher quality share among total production nearly 77% compared to 46% during the same period of last year.

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

Source: Sieca


Image 23: Sugar Balance - Ukraine (Sep-Aug Mt)

Source: Cengicaña, Sieca,,Greenpool, hEDGEpoint

The 23/24 crop season registered a significant increase in production, which is expected to reach 1.8 Mt. This increased availability led the market to expect a higher participation of the country in trade flows, at around 650 kt. 

For 24/25, given the recent correction in grain prices, many farmers are opting to produce beet and other alternative products. In terms of sugar, the market expects that this movement will ensure an even higher production than the one of 23/24 and could reach around 2Mt. This increase in availability allows for 800 kt to 1Mt sugar exports. EU would be one of its key trade partners as the region agreed to renew the suspension of import duties and quotas on Ukrainian exports to the EU for another year, until 5 June 2025. A new automatic safeguard will also be added for certain sensitive products, and sugar is one of them. 

Source: Sieca


Image 24: Sugar Balance - Russia (Mt Sep-Aug)

Source: Ikar,, Greenpool, hEDGEpoint

According to Ikar, beet sowing will start early in 2024, which could increase the risk for crop development. However, the topic is not the main discussion within the country. The Ministry of Agriculture has prepared a draft decree of the Russian Government banning the export of the sweetener until August 31, 2024, given recent higher domestic prices and availability expectations. 
It should be noted, however, that this ban wouldn’t affect EAEU partners, having 200kt being set aside for the region. According to IKAR, the export restriction will reduce the profitability of beet and sugar production, preventing even higher results than the 6.8 Mt expected to be achieved by the end of 23/24, as prices should be reduced. Nevertheless, if the country manages to produce over 6Mt in 24/25, with the ban, stocks would be extremely high, adding further pressure on domestic prices if exports are not allowed. 


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

Recent data indicates positive developments in the Chinese economy, with signs of exiting deflationary trends and ambitious fiscal targets set for 2024.
China's influence on the sugar market has been notable, establishing a price floor at 20.5 c/lb: the Asian country has pushed the buying button every time the #11 threatened to reach that level. 
The price drop in December created favourable conditions for non-producing regions, leading to significant buying activity and higher-than-expected imports from China in January and February, despite prior high import volumes. This behavior underscores the importance of considering regional price disparities rather than solely relying on ZCE parity.

With an astonishing 3Mt of imports so far in 23/24, the country could reach over 6Mt of imports (including syrup and smuggling estimates). As China's production picks up and shows signs of recovery, domestic prices could see a seasonal decline, pushing the import arbitrage slightly lower and discouraging further buying at current international price levels.

Image 26: Total Imports - China ('000t - exc. syrup and smuggling)

Image 27: Total Production - China ('000t)

Source: GSMM, hEDGEpoint

Source: CSA, Refinitiv, Greenpool, hEDGEpoint

Weekly Report — Sugar and Ethanol

Written by Lívea Coda
Reviewed by Laleska Moda

Sugar and Ethanol Desk

Murilo Mello
Vipul Bhandari
Gabriel Oliveira
Etori Veronezi


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