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Outlook Remains Negative Even as Sugar Rebounds


On December 23rd, raw sugar futures on ICE reached a nearly six-year high of about 21 cents per pound. This price increase was attributed to expectations of strong demand and somewhat constrained global supplies.

Brazil, the leading producer in the world, declared that it would not reinstate federal gasoline taxes, likely boosting the use of sugarcane rather than ethanol.

On the supply side, a decline in European sugar production and a postponement of Thailand’s sugar harvest has given bulls additional cause for confidence.

However, promising production prospects in important nations like Brazil and India have hampered the commodity’s medium- to long-term outlook.

Global sugar production is expected to increase by 5.5 percent from 2021–2022 to a new high of 182.1 MMT, according to a prediction made by the International Sugar Organization last year.

India’s sugar mills have exported 2.8M tonnes of sweeteners this season, or 56% of the cumulative 5M tonnes of the season’s authorized minimum indicative export quota.

By September 2019, an additional 0.5M tonnes of sugar can be exported. Therefore, India’s sugar exports would need to meet their quota by about a third this year, according to Praful Vithalani, Chairman of the All India Sugar Traders’ Association (AISTA).

The government allocated a certain amount to each mill at the start of this season for sugar exports for the current season, along with incentives like transportation subsidies and the ability to release an additional amount for the domestic market in addition to interest subsidies for maintaining buffer stocks and other things. However, most sugar mills still need to reach their unique capacity allotment due to factors outside their control.

Compared to the previous season, the sugar recovery in Northern India has been noticeably better. While still not as high as that seen in North India, the sugar recovery is better than in other regions of the country, including Maharashtra and Karnataka. As a result, less sugarcane is being crushed this season than last.

Total carryover stock for the upcoming season should be 14.2M tonnes. This is based on the opening balance of 10.7M tonnes as of October 1, 2018, estimated production of 33M tonnes, domestic consumption of 26M tonnes, and exports of 3.5M tonnes.

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