Brazilian sugar struggles to maintain ethanol balance

Focus on Futures: Sugar

The sugar bear had a brief respite this past fall when poor harvest weather in Brazil threatened the quality and quantity of the crop. After trading down to multi-year lows in early September, prices rallied 10% through mid-October. Weather conditions improved, and prices came right back down to test the 19¢-per-pound level. Several months ago weather conditions were so poor that analysts put the Brazilian crop – and by extension exports – significantly behind the previous year. Now that the harvest of the Center-South region is complete, crop and export estimates are actually ahead of the 2011-12 season.

Most other output developments have been to the bullish side, though.

Still in Brazil, 90% of the crop is grown in the South Center. The balance is grown in the north, and those regions experienced extreme drought during the growing season. In some areas, as much as 30% of the crop was lost. On average, the losses are expected to be up to 15% of output for the region, or 1.5% of total Brazilian output. It’s not an overwhelming amount, but enough to mitigate some of the effect of the extraordinary recovery of the South Center.

The 2012-13 Indian crop suffered from a below average monsoon. As we guessed in previous articles on sugar (see Focus on Futures, August 31), estimates that put this year’s output on par with the previous year’s results of 26 million tonnes were impossible to achieve. Indeed, current estimates have fallen to as low as 23 million tonnes, which is dangerously close to domestic consumption levels. That would cast some doubt on the wisdom of the liberalized export policy. Ending stocks for the recently completed 2011-12 marketing year will be about 6 million tonnes, which is adequate, but makes it imperative for the coming 2013-14 crop to have a proper monsoon season.

Thailand had record output for two consecutive years of about 10 million tonnes in 2010-11 and 2011-12. It was a sudden jump of about 40% over the average of 7 million tonnes that the country had produced in previous years. The pattern was expected to continue into 2012-13, but precipitation was insufficient and as a result, output will be close to 1 million tonnes below early season forecasts. Thai exports will still be over 7 million tonnes, but about 1 million tonnes less than in 2011-12.

Page 1 of 2 >>
Comments
comments powered by Disqus