Simon Hood
Wilmar Manager Grower Marketing
The sugar market remains in no man’s land as the window between the close of the 2023-24 Brazilian crush and the start of the 2024-25 season seems impossibly short. The final production for this season’s output is yet to be determined, but is heading towards a record harvest.
Projections for the 24-25 season are fluid in the analysts’ spreadsheets. The early number of 640+ million mt of cane is being wound back, due to the dry weather in December and January being factored into the yield. February was forecast to be a wetter month, but has not delivered as much moisture as desired. Ranges now in the market cover 600-635 million mt, with Wilmar at the upper end of that scale.
Another important variable is the production mix between ethanol and sugar. This ratio pushed the market to the upside last year with the final coming close to 50:50. There is an obvious incentive to increase this percentage with ethanol parity trading closer to US14c/lb versus the US22c/lb for #11. Reports suggest that mills are rushing to increase crystallisation capacity. However, as we are acutely aware, it takes some planning to design, build, and install mill components so a step change in capacity may be constrained.
There is talk of further investment at the Brazilian docks to ease loading bottlenecks, which global logistics managers will support.
If the dry weather persists, the new season crush might start earlier. This will be bearish in the short-term, as more sugar becomes readily available, but will potentially bode well for constructive pricing later as yield prospects will be cut. Watch this space.
Following a poor and patchy monsoon, the Indian crop has performed better than expected. Nevertheless, India is not expected to be a significant player in global trade for the foreseeable future, with any increase in production siphoned to the ethanol production.
Doubt remains about how quickly the Thai crop will be cut out. The outlook for next year is not for a massive recovery of cane hectares, as competing crops maintain a viable alternative in Thailand. This should support the far-east premium as Australian sugar will remain in strong demand.
Finally, the speculative community is keeping its powder dry. After liquidating a significant net bought position for much of the 2023 season, they are yet to move far away from a small net long balance in the 2024 calendar year. At the end 2023, we witnessed the impact of the head exiting in unison, so it is important to keep a bead on the signals that were used to drive their investment flows.
For more information, contact your local Wilmar Grower Marketing consultant.
This graph charts the Brazilian crop size and the sugar-ethanol mix since 2017-18.
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