W45: Sugar Update

In W45 in the Sugar landscape, on Thursday, November 09, the sugar market witnessed slight gains in sugar futures contracts on the New York and London stock exchanges after a price fluctuation on November 07. The most actively traded raw sugar maturity on the New York Stock Exchange appreciated by 0.51%, reaching USD 0.2735 per pound (lb). In London, the primary maturity increased by 0.39% to USD 739.3/mt. Earlier in W45, the future prices decreased by over 1% after reaching a 12-year high, which could be considered an adjustment in response to the recent price surge. The current price increase is supported by global supply restrictions, mainly due to the prospects of bankruptcy in Thailand and India, the world's third and second-largest sugar exporters.

The Thai Sugar Millers Corp (TSMC) predicted a significant drop in Thailand’s sugar production to 7 to 8 million tons in Marketing Year (MY) 2023/24. This presents a 27 to 36% decrease from the 11 million tons crushed in the previous crop and an 11 to 22% decrease compared to the previous estimate in early September. This decrease is mainly due to severe droughts in the major producing areas. As a result, the country’s sugar exports are expected to drop to 4 to 5 million tons, a significant decrease from the previous forecast of 7 million tons. The decline of Thailand's output will further tighten the global supply and support solid future prices, which are already at a 12-year high after India announced that it would maintain restrictions on exports beyond the end of October.

Furthermore, according to the United States Department of Agriculture (USDA), Vietnam’s sugar self-supply rate has dropped significantly after implementing the ASEAN Trade in Goods Agreement (ATIGA). In the last five years, Vietnam’s sugar self-supply rate has decreased by over 50%, with the current level being 35 to 40%. In response, the Ministry of Industry and Trade in Vietnam imposed 47.64% anti-dumping and anti-subsidy duties on Thai sugarcane. Moreover, the state has also implemented anti-circumvention measures for sugar products from five ASEAN countries, including Indonesia, Malaysia, Cambodia, Laos, and Myanmar. Vietnam was the third-largest sugar importer in Southeast Asia and ranked 13th in the world in 2022. The country must strengthen trade remedy measures to ensure a healthy competitive environment.

Lastly, in Indonesia, the price of sugar at the consumption level increased from USD 0.9280 per kilogram (kg) (IDR 14,500/kg) to USD 1.0240/kg (IDR 16,000/kg) in July 2023. However, considering the recent price surge in both domestic and international markets, Indonesia’s ministries and institutions have discussed a further price adjustment at the consumer level. It is expected that the price will be adjusted to USD 1.152/kg (IDR 18,000/kg) in the near future. Moreover, the government will give retailers flexibility on sugar pricing until the prices return to reasonable levels.