Sugar prices accelerated growth, and May futures on the New York Stock Exchange rose 4.2% to an 11-year high of 0.2591 $/lb or 570 $/t (+23% for the month) amid a reduction in the harvest in India, delayed harvesting in Brazil and technical purchases associated with the closure of May contracts.
Limited stocks
Due to limited stocks of sugar available on the physical market, traders are forced to raise prices to close short positions in contracts.
The reduction in world sugar reserves has recently supported quotes. According to the Indian Association of Sugar Factories (ISMA), sugar production in the country decreased by 1.15% from October 5 to April 4 to 32.9 million tons, so in my 2022/23, India, which is the world’s second largest sugar producer, will be able to allow the export of only 6 million tons of sugar, which is 46% less than the 11.2 million tons of the 2021/22 season.
ISMA experts on January 31 lowered the forecast of sugar production in the country in my 2022/23 from 36.5 to 34 million tons compared to October estimates, and the export forecast from 9 to 6.1 million tons.
The International Organization for Sugar (ISO) on February 24 raised its forecast for a global sugar deficit in my 2021/22 from 1.67 to 2.25 million tons compared to November estimates, and lowered its forecast for a sugar surplus in my 2022/23 from 6.19 to 4.15 million tons. ISO experts expect sugar production in my 2022/23 to grow by 4.8% to a record 180.4 million tons.
According to estimates by S&P Global Commodity Insights, the global sugar surplus in my 2022/23 will amount to 600 thousand tons, and in my 2023/24 it will rise to 4.5 million tons.
Brazil, according to the forecast of Conab, in my 2022/23 will increase sugar production by 6% to 37 million tons, and as of April 1, it increased by 5.2% to 33.728 million tons.
In the EU, sugar production in my 2022/23 could fall by 7% to 15.5 million tons, which also supports prices.
The US Climate Prediction Center increased the likelihood of the manifestation of the El Niño phenomenon from August to October from 61% to 74%. It will bring drought to India and downpours to Brazil, which will negatively affect sugar production. The last time sugar crops in Asia suffered from El Niño were in 2015 and 2016, which led to a jump in prices.
Ukraine can increase sugar beet sowing
Against the background of high world prices, Ukraine can intensify the export of significant sugar reserves and increase the area of sugar beet sowing. Sugar production in 2022 amounted to 1.33 million tons, slightly lower than the pre-war 1.45 million tons in 2021, but fully satisfies domestic needs.
In my 2022/23, the area of sugar beet sowing decreased from 226 to 181.4 thousand hectares compared to the previous season, and the number of processing plants – by 30% to 23, but the yield increased from 48 to 50 t/ha. In 2023/24 MY, the sowing area will increase to 220-230 thousand hectares, and the number of plants – up to 29.
As of 01.09.22, sugar reserves amounted to 491 thousand tons, which with the production of 1.33 million tons and consumption of 1 million tons will allow exporting 500-600 thousand tons of sugar.
Sugar exports in my 2022/23 as of March 28 increased 4.8 times and reached 265 thousand tons, while for the whole of my 2021/22 it amounted to only 55 thousand tons.
The EU permission to supply sugar from Ukraine without tariff quotas and duties has changed the geography of exports. In addition, last year Europe had a bad harvest and high natural gas prices, which reduced production and increased the cost of sugar, so Ukraine increased sugar supplies to the EU, and will continue to work on this in the future.
Source: Graintrade