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Looking back at the 2020/21 crushing season, looking back at the 2020/21 crushing season, the world's major sugar-producing regions are dominated by reduced production, European (including Russia) sugar beet sugar production has decreased due to frost and disease, Thailand has continued to reduce production due to the reduction of sugarcane planting area, and Brazil has reduced production by about 6 million tons in the 2021/22 crushing season, and the overall shortage has led to a historical low in global sugar stocks. With the arrival of the new crushing season, the global sugar supply is still a relatively large problem, although the recent due to high freight and high sugar prices, Brazil's raw sugar demand showed a low level, but overall in the next six months of sugar supply there is still a big contradiction. In addition to the ethanol contradiction in the previous article, the short-term sugar supply demand will also be affected by the weather risk - La Niña.
Figure 1 Brazilian sugar exports (tons)
Source: Brazilian Customs
A new round of La Niña has been formed
According to NOAA's NINO3.4 SST forecast, a new round of La Niña has been confirmed to be formed. The definition of the La Niña event is that the occurrence of la Niña for more than five consecutive months can be defined as a La Niña event. According to the chart below, from October this year to March next year, there is more than 50% probability of La Niña in the 6 months of contact, so it is basically determined that in the fourth quarter of 2021 and the first quarter of 2022, there will be a round of medium and high intensity La Niña events. Since there has already been a La Niña incident in 2020-2021, this year will be the "Year of Double La Niña". The impact of the La Niña incident on sugar producing areas can be referred to in the previous round.
Figure 2 La Niña event probability
Source: NOAA
Brazil may face another drought
From the end of 2020 to the beginning of 2021, brazil suffered a drought that lasted for nearly a year due to the impact of the La Niña incident, and the crop failure caused by the drought directly reduced its sugarcane yield by about 14%, and Brazil's sugar production was reduced by about 6 million tons. And a new round of La Niña will continue to put Brazil's crops at extremely high risk of drought. The current stage is the end of the 2021/22 crushing season, Brazil has determined early harvesting, then the fourth season to the first quarter is a very critical growth stage of Brazilian sugarcane crops. Drought at the growing stage will continue to boost sugar by causing great concern about the situation of sugarcane crops in the 2022/23 crushing season.
Figure 3 Brazil has a flat precipitation distance of 90 days
Source: World Ag Weather
The northern hemisphere will have more precipitation
The northern hemisphere with India and Thailand as the main sugar producing areas, with the increase in precipitation caused by La Niña, although the crop growth in the northern hemisphere has benefited from this, but since the fourth quarter of 2021, the northern hemisphere has officially opened, and the heavy precipitation encountered in the process of crushing will be a very big threat to the crushing process of sugar mills, and will also cause a threat of flooding, and the sugar supply at the beginning of the crushing season will be affected, which is still a boost for New Zealand sugar. So overall, the La Niña incident is one of the important factors for the strong operation of New Sugar in the future, which needs continuous attention.
Figure 4 Climatic impacts of La Niña (northern hemisphere winter, southern hemisphere summer)
Source: NCC, weather enthusiast
This article originated from the COFCO Futures Research Center