In W34 in the sugar landscape, on Monday, August 21, sugar futures for the Oct-23 contract initially dropped to USD 23.40 cents per pound (lb) and remained unchanged on Tuesday, August 22, on the New York Stock Exchange. This decline was attributed to a lack of demand from China, which imported 110 thousand metric tons (mt) of sugar in Jul-23, a significant drop of 60.5% year-on-year (YoY). However, sugar futures rebounded on Wednesday, August 23, with a 1.92% increase to USD 23.85 cents/lb. This upward price trend continued, rising by 1.84% on August 24 to USD 24.29 cents/lb and further increasing to USD 24.83 cents/lb on August 25. This is mainly attributed to India's plan to ban sugar exports for the 2023/24 season starting in Oct-23, the first such ban in seven years due to inadequate rainfall affecting sugarcane yields.
Currently, the Indian government's primary focus is on meeting domestic sugar demand and utilizing excess sugarcane for ethanol production. India will likely have insufficient sugar for export quotas in the 2023/24 season. The 2022/23 season allowed sugar mills to export 6.1 million metric tons (mmt) until Sep-30, after a record 11.1 mmt in 2021/22. India's sugar output in 2023/24 could decline by 3.3% YoY to 31.7 mmt due to reduced monsoon rains, potentially affecting planting for the 2024/25 season. The recent surge in domestic sugar prices led the Indian government to approve an additional 200 thousand mt for Aug-23 sales due to concerns about food inflation.
Sugarcane crushing reached 47.87 mmt, with a production of 3.46 mmt in central-southern Brazil during the first half of Aug-23. This represents a surge of 23.38% in crushing and an increase of 31.22% in production compared to the same period in 2022. This increase occurred despite intermittent rains that minimally affected the process. The Sugarcane Industry Union (Unica) emphasized that while crushing volume is positive, occasional rains did disrupt harvest operations in some areas, underscoring the ongoing risk associated with El Niño. This situation could impact the potential outcome of the 2023/24 harvest. Given the sizable crop in central-southern Brazil, maximizing grinding days remains crucial. Additionally, 2023’s processing lags behind the 2020/21 season by 14 mmt, which exceeded 600 mmt in crushing. The Sugarcane Technology Center (CTC) reports that Brazil’s 2022/23 sugar productivity is at 93.6 mt per hectare (ha), a 22.4% increase compared to the 2021/22 season.
Lastly, Indonesian sugar production in 2023 is expected to be lower than in 2022 due to extreme drought attributed to El Niño. The Association of Sugar Experts (Ikagi) indicates that sugar production is highly susceptible to climate conditions, as it relies on sufficient water for sugar cane growth. While there's an anticipated increase in harvest area of around 5 thousand ha to 10 thousand ha, sugar production may only reach 2.3 mmt to 2.4 mmt in 2023. Although El Niño has led to slightly better yields, sugarcane productivity has fallen by approximately 20% YoY, offsetting the yield increase. This decline in productivity is attributed to the hot and dry conditions affecting the sugar cane's sugar-forming phase. Additionally, the sugar balance in Indonesia still requires significant imports, as domestic reserves fall short of monthly demand.