Late Monday, the International Sugar Organisation (ISO) unveiled a new global sugar balance sheet for the 2021/22 crushing season. The new balance sheet shows that ISO expects global sugar production to be 17,051 tonnes in the 2021/22 crushing season, an increase of 39,000 tonnes from the 2021/220 estimate; global sugar consumption in the 2021/22 crushing season is expected to be 172.44 million tonnes, down 585,000 tonnes from the November 2021 estimate; and ending stocks at 94.43 million tonnes, down from 96.55 million tonnes in 2020/21.
First, the sugar gap in the 2021/22 crushing season will further shrink
Later on Monday, the International Sugar Organisation (ISO) unveiled a new global sugar balance sheet for the 2021/22 crushing season. The new balance sheet shows that ISO expects global sugar production to be 17,051 tonnes in the 2021/22 crushing season, an increase of 39,000 tonnes from the 2021/220 forecast; global sugar consumption in the 2021/22 crushing season is expected to be 172.44 million tonnes, down 585,000 tonnes from the November 2021 estimate; and ending stocks of 94.43 million tonnes, down from 96.55 million tonnes in the 2020/21 crushing season. The upward adjustment of production and the downward adjustment of consumption are the main reasons for the contraction of the gap after this adjustment.
Figure 1. Global Sugar Balance Sheet 2021/22
Data source: ISO, Brick agricultural data intelligent terminal Unit: million tons, % Note: Market year, October - September of the following year
Second, India and Thailand have abundant supplies
The Office of the Thai Sugarcane and Sugar Association (OCSB) said rainfall in Thailand's cane region was good during the 2021/22 crushing season, while high sugarcane purchase prices prompted farmers to switch other crops to sugarcane, and sugarcane production is expected to grow by nearly a third, with sugarcane crushing expected to reach 85.7 million tonnes in Thailand in the 2021/22 crushing season ending next April, and sugar production is expected to reach 9.5 million tonnes, well above the previous crushing season. As of the end of February 2022, The cumulative crushing volume of sugarcane in Thailand was 74.21 million tons, and the cumulative sugar production was 8.01 million tons, with a sugar content of 12.6. At present, thai sugarcane intake and sugar production are higher than the same period in the previous crushing season, but the sugar content has decreased from the same period of the previous crushing season, or due to the recent rainfall, the final sugar production may be less than 9.5 million tons, but it will also be higher than the sugar production of the previous crushing season.
Figure 2. Sugar production in Thailand
Data source: Sugarzone, Brick Agricultural Data Intelligent Terminal Unit: 10,000 tons Note: Market year, October-September, 2021/22 crushing season is forecast
Sugarcane will be more expensive than cassava this season, but it is worth noting that if Thailand suffers another rainfall season and cassava is more resilient in the face of drought than sugarcane, more farmers may switch to cassava, and recently cassava prices are higher than sugarcane. In addition, the current rise in the cost of gasoline, fertilizers and pesticides may also affect farmers' tendencies to grow.
Figure 3. Comparison of sugarcane and cassava cultivation gains in Thailand
Data source: CZARNIKOW, Brick Agricultural Data Intelligent Terminal Unit: Thai Baht /Lai Note: 1 Rai = 2.4 acres, 21/22 is forecast
India produced 22.09 million tonnes of sugar as of 15 February 2022, up 5.64% year-on-year, and the Indian Sugar Mills Association (ISMA) expects sugar production in the 2021/22 crushing season to be 31.45 million tonnes, up from 450,000 tonnes in the previous crushing season, exports are expected to be 6 million tonnes, ending stocks are expected to be 7.65 million tonnes, and the inventory-to-consumption ratio will decline for three consecutive years. As of the end of January, Indian sugar mills had signed 5 million tons of sugar contracts without government subsidies, and the actual export of sugar was 3.15 million tons. In addition, ISMA said the southwest monsoon in 2022 is expected to be normal and the sugarcane outlook may continue to be good.
Third, the south-central region of Brazil has been free of sugarcane pressing for 4 consecutive bi-weeks
Drought and frost-induced sugarcane production is the main theme of this season in Brazil, and the 2021/2022 crushing season officially began in April 2021, compared to the previous crushing season, most sugar mills have been delayed due to the adverse impact of dry weather on the growth of sugarcane crops in south-central Brazil. Brazil, which has entered the crushing period, has been affected by drought and frost, sugarcane production has declined significantly, and sugarcane has aged more, in addition, drought has also caused the progress of new cane planting to lag behind. Although the rainfall in Brazil in the later period is close to normal, sugarcane growth has recovered to a certain extent, but it is difficult to compensate for the decline in sugarcane production caused by the previous drought. Because of this, since the second half of December 2021, there is no sugarcane for crushing in the south-central region, which is also the first time that there is no sugarcane to be crushed in the Brazilian crushing season, the sugar production in the central and southern regions has stopped at 32.03 million tons, and in 2021/22, as of February 16, 2022, the cumulative sugarcane crushing capacity in the south-central region of Brazil, the main sugar producing country in the southern hemisphere, was 521.62 million tons, a year-on-year decrease of 12.79%; the cumulative sugar production was 32.03 million tons, a year-on-year decrease of 16.21%.
Figure 4. Progress of sugar production in south-central Brazil
Source: UNICA, Bricker Agricultural Data Intelligence Terminal
Fourth, domestic sugar production may be further revised down
At present, domestic sugar production has entered a late stage, by region, the 2021/22 crushing season in the northern sugar beet sugar due to the decline in sugar beet production has been greatly reduced, of which, Xinjiang sugar mills have all shut down, the final sugar production of 337,500 tons, a year-on-year decrease of 238,600 tons; as of the end of January 2021, Inner Mongolia has produced a total of 470,000 tons of sugar, and the final sugar production is expected to be less than 500,000 tons.
Sugarcane sugar in the south is affected by the growth of sugarcane, and the crushing in Guangxi is generally delayed in the 2021/22 crushing season. According to incomplete statistics, the number of sugar mills in Guangxi's 2021/22 crushing season has reached 5, a year-on-year decrease of 18. From the data released by the China Sugar Association in each crushing season, the average sugar production in Guangxi in February was about 1.6 million tons, and the Spring Festival holiday was mostly distributed in February, in addition, considering that in mid-to-late February this year, guangxi rains caused some sugar mills to break the trough, affecting the pressing progress, sugarcane in some areas was affected by low temperature weather, sugarcane quality was damaged, affecting sugar, Blake estimated that Guangxi's sugar production in February was 1.20-1.3 million tons, and after entering March, as the sugar mills continued to harvest, Brick estimates that Guangxi's sugar production this season is 6.1 million tonnes.
Since the 2017/18 crushing season, affected by tropical fruit land competition, Guangdong's sugar production has declined year by year, combined with the results of the Breck research team in 2021, it is estimated that Guangdong's sugar production will remain at about 530,000 tons. As of the end of January, Yunnan's cumulative sugar production was 481,400 tons, a year-on-year decrease of 158,300 tons, and the sugar production rate was 11.62%, down 0.31% from the same period last season and 158,300 tons year-on-year.
Based on the recent sugar mill harvest and weather conditions, Brick estimates that the national sugar production in the 2021/22 crushing season is about 9.7 million tons, which is 100,000 tons lower than the third estimate, and from the current situation, the final output may still be further revised down.
Figure 5. Sugar production in China since the 2000/01 crushing season
Source: China Sugar Industry Association, Brick Agricultural Data Intelligent Terminal Note: Market year, October -September, 2021/22 crushing season is forecast
Fifth, the market outlook
At present, it is in the cycle of concentrated listing of new sugars in the northern hemisphere, the supply is relatively abundant in the short term, the overall performance of the market is weak, and the trend of international sugar prices mainly follows the trend of commodity markets such as crude oil. The escalation of the Russian-Ukrainian conflict has led to increased volatility in global financial markets, brent crude oil has remained strong, and as Brazil's new crushing season approaches, the market has set its sights on Brazil. Sugar production is affected by sugarcane yield on the one hand and sugar ratio on the other hand. Due to the sugarcane growth period weather better than the previous year, sugarcane production is expected to resume growth, but sugarcane growth on the one hand depends on the weather, on the other hand also depends on fertilizer, Brazil's industrial base is weak, fertilizer dependence on foreign countries is high, in the context of the current Russian-Ukrainian conflict how to ensure the supply of fertilizer is a problem that Brazil has to face. The change in the sugar ratio needs to pay attention to the ethanol orgyration price and the alcohol-oil ratio, as of February 25, the production price of são Paulo fuel aqueous ethanol is 2.87 reais /liter, which translates into a sugar price of 17.01 cents / lb, and the yield of sugar production is still higher than that of ethanol.
Figure 6. Brazilian sugar alcohol ratio
Data source: CZARNIKOW, CEPEA, ICE, Brick Agricultural Data Intelligence Terminal Unit: Cents/Lb
UNICA's biweekly report shows that the brazilian domestic ethanol sales data in the first half of February increased month-on-month, and fuel ethanol demand may improve. The escalation of the Russian-Ukrainian conflict has promoted the strength of the crude oil market, international consultants have raised crude oil price expectations, Morgan Stanley raised the second quarter Brent crude oil price expectations to 110 US dollars / barrel, coinciding with the brazilian election year, the sugar ratio is still variable. On the whole, Brazil's 2022/23 crushing season sugarcane production is expected to resume growth, sugar production has advantages but the sugar ratio is still variable, sugar production estimates are relatively conservative; India and Thailand new sugar listing is accelerated, the next crushing monsoon or will be conducive to the growth of new season crops, the northern hemisphere supply is abundant; and beet sugar needs to be paid attention to, this season China's beet sugar production reduction may not be an isolated case, if the impact of the Conflict between Russia and Ukraine expands, European farmers or will switch to higher prices of corn and wheat, sugar beet or will face reduced production. International sugar prices are expected to remain volatile, crude oil prices if they continue to be strong or will support the future rise in sugar prices, overall, Brazil as the bottom, India as the top of the pattern continues to exist.
This article is based on publicly available information that the Bricker Consulting Research Team believes to be credible, and no warranty is given as to the accuracy or completeness of the information, nor does it assume any responsibility for any investor arising from the use of this report. Brick Consulting undertakes that, to the extent of the author's knowledge, the author and the interested parties in the property do not have any interest in the product evaluated or recommended.