W20: Sugar Update

In W20 in the sugar landscape, the International Sugar Organisation (ISO) released its third estimate which indicates a substantially reduced surplus in the current season of 0.852MMT, compared to 4.151MMT forecast in February. Sugar production is expected to reach 177.365MMT in 2022/23, down from 180.431MMT as previously forecast, while world consumption is expected to total 176.513MMT, up 0.233MMT from the previous estimate. Global export availability during the 2022/23 season has been revised to 63.898MMT, down from the previously forecast 64.548MMT and down from last season's total of 64.001MMT.

On Monday, May 15, sugar futures prices on the New York Stock Exchange closed with a slight increase of 0.27% at 26.29 cents/lb after falling in the morning because of supply concerns related to lower-than-expected crops in Asia and concerns about the effects of the El Niño phenomenon on the sugarcane harvest in Brazil, the world's largest sugar producer. However, due to pressure from profit-taking action, a drop in oil price, and appreciation of the dollar against the Brazilian real, the price of sugar fell 0.84% to 26.07 cents/lb on May 16 and then continued to fall 1.16% to 25.61 cents/lb on May 18. On Friday, sugar futures rose again by 0.66% to 25.78 cents/lb, supported by concerns that El Niño could reduce production in key Asian producers such as India and Thailand. The weather has already had an influence on India's harvest for 2022/23 in recent months. Monsoon rains in India, the world's second-largest exporter of sugar, begin next month.

The 2023/24 Brazilian crop had a sluggish start to its harvest, which will only pick up in May after rains in April. Brazil's Centre-South region produced 988.97MT of sugar in the second half of April, an increase of 5.85% from the 934.27MT in the 2022/23 season. According to the National Oceanic and Atmospheric Administration (NOAA), May through July in Brazil have an 82% chance of experiencing El Niño conditions, which are expected to last into early 2024. The occurrence generally brings drier than normal conditions in parts of Asia and Australia and wet weather in Brazil, historically hurting production in major sugar areas. Due to costly imports and decreased factory output, Kenya's optimal weekly sugar stock decreased by 80% to 4K MT from an average of 20K MT. As a result, retail prices have increased to a record high of USD 3.04/2kg in W20 from USD 2.17/2kg in W19. In Q1 of 2023, Peruvian exports of refined cane sugar reached 24,753MT, worth USD 17.12M, an increase of 553.16 YoY in volume and 608% YoY in value from 3,789MT of refined cane sugar worth USD 2.41M exported in Q1 of 2022. The main destination for refined cane sugar from Peru was Ecuador, which made purchases for USD 12.46M 72.75% of the total value exported by Peru.