USDA: BRAZIL PRODUCES, AND INDIA CONSUMES
The week was relatively calm due to the American holiday on Monday and the Brazilian holiday on Thursday. All the same, with the daily average volume of 100,000 traded contracts (the yearly average is 134,000 contracts), the sugar futures market in NY closed out Friday with July/2024 at 18.32 cents per pound, 13 points below last week’s close, representing a decline of 3 dollars per ton. The other futures months closed out at an average low of 10 points equivalent to a 2.50 dollar per ton discount. The funds reduced the short position to 81,479 lots, covering 3,321 lots – a short, smooth week.
US Department of Agriculture (USDA) has released its report on world supply and demand. The agency estimates a global production of 186 million tons for the 2024/2025 crop, greater by 2.5 million tons against the previous period. Brazil leads production with 44 million tons followed by India with 34.5 million tons (99 out of 100 Indians will challenge that number). The European Union comes next with an estimated production of 15 million tons, Thailand with 10.2 million tons, an increase of 1.4 million tons against the previous crop, but very far from its record of 14.7 million tons in the 2017/2018 crop. China, the United States and Australia have been producing just about the same volume for five years – 10, 8.5 and 4.2 million tons, respectively. No surprises there.
In terms of global sugar production, Brazil, India, and Thailand account for 50% in this regard, but when we look at sugar exports for the free market the three countries grab a slice of 75%. The world depends on these three producers.
The world production has sped up its growth. Looking at a 10-year long period, running from 2015/2016 to 2024/2025, the production has grown 0.45% per year; however, only over the last five years has this performance been 0.88% per year. In absolute numbers, the variation in sugar production over this period has been 7.9 million tons, out of which 5.7 million tons are from Brazil.
The world consumption, according to USDA, should reach 178.8 million tons of sugar, a little less than 500,000 tons per day. India is the greatest consumer with 32 million tons followed by far by the European Union with stagnant 16.8 million tons for eight crops, China with 15.7 million tons, the United States with the same 11.3 million tons for six crops and Brazil, whose per capita consumption continues plummeting, with 9.5 million tons.
Over a 10-year period, the world consumption has grown 0.62% per year (a little above production); however, over the last five years, the consumption has grown 0.84% per year, in line with the production growth. In absolute numbers, the increase in sugar consumption over this 5-year long period has been 7 million tons, out of which 5 million tons are from India. These five years could be summed up in one sentence: Brazil produces, and India consumes.
The difference between production and consumption of sugar over the last five years shows a surplus that has already hit 9 million tons in the 2021/2022 crop and now, still according to the USDA report, is above 4 million tons. In a simplistic analysis, the numbers point to some higher price difficulty. But we will later see some factors that can change this view.
The increase in sugar per capita consumption over the last 10 years has been amazing. This survey is based on the consumption numbers published by the American agency crossed with the estimated population by the World Bank. In 10 years, the sugar per capita consumption in Indonesia has grown 6.07 kilos, in Pakistan 4.95 kilos while in India it has grown 1.9 kilos over the same period.
It is interesting to see that these important abovementioned consumers still consume below the world average, which today is at 22 kilos per capita. India is practically at this level, China at 12 kilos, Indonesia, and Pakistan at 27 kilos – above the world average – and the rest of the world is at 20 kilos. That is, there is plenty of room for this consumption to grow, especially with the improvement on Asian economies. For example, the growth of the per capita consumption in Indonesia at 607 grams per year is equal to a soda can every three weeks. These countries are still far from reaching the European or American consumption, at 37 and 33 kilos, respectively.
The future of the sugar is constructive for this reason – population growth in Asian countries above the world average as well as the per capita consumption. This virtuous combination leads us to estimate that in five years the world will consume – conservatively – 10.7 million tons more sugar. If Brazil participates as a supplier of 60% of this volume, we will need to crush another 48 million tons of sugarcane. If the country participates with 75%, which has been the case over the last five years, then this need jumps to 60 million tons.
About the technical part, our collaborator Marcelo Moreira, notes that July/2024 and October/2024 are testing the year’s low with both maturities trading at 18.03 cents per pound. Breaking through the 18 cents, the market continues aiming at going for 16. Our expectations for a possible slowdown of the Chinese and American economies continued impacting the oil quotations – and directly reflecting on the sugar quotations. Over the week the WTI-type oil contract closed out at 77.16 dollars per barrel and type Brent at 81.30 dollars per barrel. Important supports continue being the floors of the Bollinger Bands of the 50 days (both for July/2024 and October/2024) which closed out at 17.27 and 17.34 cents per pound, respectively. The next resistances for July/2024 are at 18.3/18.91/19.24 cents per pound and for October/2024 are at 18.41/19.40/20.88 cents per pound.
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To read the previous episodes of World Sugar Market – Weekly Comment, click here
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