The world sugar market outlook depends on the evolution of two factors - world sugar consumption and the future action of the funds, advised Robin Shaw of the Marex Spectron consultancy. But neither can be predicted with confidence.
Other uncertainties are the next Indian monsoon (although the first indications are reassuring); Chinese import policy; and CS Brazilian yields.
Consumption continues to fall in Europe, Mr Shaw noted - several producers who had thought they were sold out on the basis of expected sales to regular customers, in fact still have some stocks to sell.
Another bearish factor is that white sugar demand has been very poor for a very long time, he continues. While the white sugar premium may look historically high at over $100, “in fact, due to the raw sugar inverse and high raw sugar freights, it still does not cover the costs of tolling”. The continued low premium must mean a reduced white sugar demand, said Mr Shaw. In addition, the ‘Ramadan rush’ for the product is now virtually over.
More bullish factors are that nominations of ships in CS Brazil continue at a high rate, while most analysts of the Asian and African markets believe that demand is increasing with population growth.
The sugar market remains tight - the recent rally accelerated some selling – largely from India – while reducing volumes bought by consumers due to higher prices.
Chinese inscrutable over demand
But the Chinese market is difficult to read. “The AIL tonnage has been fixed at a maximum of 2.87 million tonnes, which is well above the original 1.9m tonnes (though it is actually, as we understand it, and we are not at all confident that we do, slightly below last year’s AIL tonnage),” said Mr Shaw. There are reports of 460,000 tonne of sugar purchases for China.
In Brazil, bioethanol supplies remain very tight until the new crop harvest gets under way. “Any delay in the start of that crop would be serious and might influence a few mills to make ethanol rather than sugar at the start of the crop,” he noted.
A trade consensus points to a 36m tonne Brazilian production (38.5m tonnes in 2020) with potential for a further downgrade. At the same time, there is also concern over competition with soybeans for logistics over transport to the port and portside loading space. And global freight rates are also high, which could deter marginal shipments.
Doubts are growing over the sugarcane crop area in Thailand, where new crop crushing starts in December 2021. With cassava prices increasing in line with sugar values, farmers may be attracted to replacing some of their cane area with cassava.