Exportações brasileiras de açúcar
Sugar and Ethanol

Brazilian hegemony over sugar market strengthens

Oct, 17, 2022 Posted by Gabriel Malheiros

Week 202242

Brazil will likely retain dominance over the global sugar market in 2022-2023, typically characterized by a modest production surplus. This scenario blossomed due to recent rains in the Center-South production hubs of the country, which has boosted crop growth on time for the upcoming harvest.

According to Plinio Nastari, president of Datagro, Brazilian mills can export 30 million tonnes of sugar during the local harvest in 2022–2023. If accurate, this volume would represent more than half of the sugar trade in the current international cycle, estimated at 57 million tonnes of sugar.

With that, the gap between shipments from Brazil and India, the second-largest exporter of the commodity, should deepen. The New Delhi authorities have indicated that they plan to issue licenses for exporting 8 million tonnes this cycle, down from 11 million in the previous yield.

India is forecast to produce 36 million tonnes of sugar this harvest period, including 4.5 million tonnes destined for ethanol production, according to Datagro. India’s biofuel program has limited the country’s ability to compete with Brazil in the sugar market. Since 2017, ethanol production has “stolen” 15 million tonnes of sugar, says the consultancy.

In Brazil alone, the farms scattered around its central and southern regions can produce up to 36 million tonnes in the next local harvest (2023/24), with additional volumes produced in the north and northeast.

Brazil’s growing importance on the international stage elevates the effects of its weather and rising fuel costs on world prices.

See below the track record of the volume of sugar (HS 1701) exported by Brazil between January 2019 and August 2022, according to the DataLiner platform.

Sugar Exports | Jan 2019 – August 2022 | WTMT

Source: DataLiner (click here to request a demo) 

Supply and demand

According to Datagro, the difference between supply and demand in 2022–2023 should be only 1.87 million tonnes. The estimate, made public last week at a dinner with executives from plants in Ribeirão Preto promoted by Citi Brasil, is comparable to those made by other companies in the market, such as Itaú BBA, which recently predicted a surplus of 2.1 million.

However, there is a chance this gap will increase. Nastari does not rule out that production in the Center-South could be 2 million tonnes higher than the initial forecast, bringing the expected surplus to 3.8 million tonnes.

A few mills have already claimed to be prepared for a robust supply scenario in the next harvest. Coruripe, for example, fears that rains favor output to such an extent that it might be impossible to crush all yields.

“If rains continue at the current intensity, yields will exceed capacity by 1 million tonnes,” commented CEO Mario Lorencatto. Coruripe can currently crush up to 15.2 million tonnes of sugarcane per harvest at its five plants in Minas Gerais and Alagoas. In addition, the company is already adding a sugar plant and increasing capacity by 1 million tons at its distillery in Limeira do Oeste (MG).

Investments like this, however, are an exception in the sector. “Companies are reluctant [to invest in capacity] because of the increase in interest rates,” says André Cury, responsible for the Commercial Bank of Citi Brasil. According to him, even with the favorable prices seen last year, the mills preferred to generate cash and reduce leverage, which is currently close to 1.15x.

The production environment is also favorable in São Paulo. According to the Mill Santa Isabel’s financial director Fabio Montecchio, the company, which has two units in the state, expects to recoup a sizable portion of its losses from the 30% break it experienced in the previous cycle with the milling of this crop and the one after it. The crushing volume for the current cycle should be 5.6 million tonnes.

Despite the ample supply, the international trade scenario continues to favor price increases, believes Nastari. The quotations are 30% above the level of two years ago, close to 17.8 cents a pound, and the consultant sees enough stamina to reach 19.50 cents a pound by March.

At least in part, firm global demand is supporting prices. Datagro estimates that consumption will increase by 2.5%, above the average of the last decade, which was 1% per year.

Source: Valor Econômico

To read the full original article, please go to: https://valor.globo.com/agronegocios/noticia/2022/10/17/cresce-a-hegemonia-do-brasil-no-acucar.ghtml

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