W2 Sugar Update: FAO Sugar Price Index Dropped by 16.6% MoM Due to Increased Production in Brazil, While Thailand’s Output Expected to Decline Amidst El Niño

FAO Sugar Price Index Dropped 16.6% MoM, But Still Remained 14.9% Higher Than 2022

On Dec-23, the Food and Agriculture Organization (FAO) Sugar Price Index hit a nine-month low, dropping by 16.6% compared to Nov-23. However, it was still 14.9% higher than in 2022. This drop was mainly due to increased sugar production in Brazil, aided by favorable weather conditions. Additionally, reduced profits from ethanol sales and restrictions on sugarcane use for ethanol production in India also contributed to the decline. Despite the decrease in December, the average value of the FAO Sugar Price Index 2023 was 26.7% higher than in 2022, reaching the highest level since 2011 due to concerns about the demand and supply balance.

Sugarcane Production in the Central-South Region of Brazil Rises by 15% YoY

As of Dec-23, sugarcane production in Brazil's Central-South region marked a 15% year-on-year (YoY) increase, reaching 619 million metric tons (mmt). This surge underscores the resilience of the sugar-energy sector despite recent challenges. The 2023/24 harvest is a redemption period for sugarcane producers grappling with adverse weather, fire damage, and escalating input prices in previous harvests. Despite two consecutive below-average harvests, the current season showcases a remarkable 15% rise in average productivity. With the harvest officially concluding in Mar-24, there is optimism that the numbers may see further increases.

The 2024/25 harvest projection, set to commence on April 1, 2024, anticipates that productivity will maintain proximity to the levels achieved in the 2023/24 harvest. However, there is some uncertainty regarding prices, particularly ethanol. Various factors, including political considerations, government policies, subsidies, and energy policies, are currently shaping the future of the ethanol market. The compensation for ethanol was tied closely to variables such as gasoline prices, with market dynamics having a more decisive influence than production factors.

Thailand's Sugar Production Expected to Decrease by 25% YoY in MY 2023/24

Thailand's sugar production in the Marketing Year (MY) 2023/24 is expected to decrease by 25% YoY, with an estimated output of 8 to 8.5 mmt. The head of the Sugar and Cane Production Authority attributed this decline to the El Niño phenomenon. Notably, Thailand's sugar exports in 2023 were 7.64 mmt out of 11.05 mmt produced.