High Demand for Thai Sugar May Result in Shortages Despite Increased Production

Sugar

Thailand

Published Jan 4, 2023

Thai sugar during Q1 of 2023 is anticipated to have a tight supply amid delays caused by rainfalls, uncertainty about India’s export policies, and higher demand from importing markets. Good rainfalls resulted in a rebound in Thai sugar exports in MY 2022/23. However, Thailand's ongoing wet weather has its downside. Ten mills in central Thailand have postponed their crushing until early January 2023 due to persistent rainfall. Additionally, Indian sugar production forecasts have driven the demand for Thai sugar to fill the supply gap in the global market. Such as Indonesia, one of Thailand's most important sugar trading partners will likely boost sugar imports leading up to Ramadan month, which will begin in late March 2023.

The global sugar market looks forward to the first quarter of 2023. Thailand, one of the world’s key sugar-producing markets, experienced good rainfall in 2022 after struggling with droughts for the past two consecutive years. This also impacted Thai sugar exports in the past two years resulting in a downward trend due to less availability of sugar. Previously in 2021, Thai sugar exports decreased by 43% YoY to 1.7 million mt.

Good rainfalls resulted in a rebound in Thai sugar exports. So far in 2022, Thailand’s cumulative rainfall was 21% higher than in 2021. In the first ten months of 2022 sugar export surpassed 3.4 million mt, an increase of 143% YoY. Thailand’s main sugar trading partners in 2022 are South Korea, Indonesia, Laos, Taiwan, and Japan. It is projected that Thai sugar production in MY 2022/23 will increase by 3% YoY to 10.5 million mt.

However, Thailand's ongoing wet weather has its downside. It has contributed to a delayed start to cane crushing and sugar production in December 2022. Ten mills in central Thailand have postponed their crushing until early January 2023 due to persistent rainfall.

Additionally, Indian sugar production forecasts have driven the demand for Thai sugar to fill the supply gap in the global market. In May 2022, India put measures in place to prevent price increases in the domestic market by limiting the export of food staples, such as sugar. Of the 36 million mt of sugar produced during MY 2021/22, Indian mills were permitted to export only 11.2 million mt. In Maharashtra and Karnataka, prolonged dry weather conditions over the summer, followed by heavy rains negatively affected the crop. Sugar production in India is expected to drop to 33.3 million mt in the current MY 2022/23, down by 8% YoY. As a result, buyers are looking for alternatives to Indian sugar for the upcoming Q1 of 2023.

One of Thailand's most important sugar trading partners, Indonesia, will likely boost sugar imports leading up to Ramadan month, which will begin in late March 2023. In December 2022, Indonesia approved an extra 300,000 mt of sugar imports aimed at regulating domestic prices and providing sufficient supplies for the upcoming Ramadan. Due to the shorter distance, Thai sugar has a freight cost advantage compared to Brazil, its main competitor. The Thai sugar during Q1 of 2023 is anticipated to have a tight supply amid delays caused by rainfalls, uncertainty about India’s export policies, and higher demand from importing markets.