The weather is one of the main players in the sugar market. Thailand is experiencing excessive rainfall, Australia is experiencing high humidity and China is experiencing problems due to frost. These are all factors that negatively affect sugar production. But there is one country that is negating all those losses: India.
According to market agency StoneX, global sugar production in the 2021/2022 season, which runs from October to September, will amount to 187,3 million tons. That is an increase of 1,9% compared to last season. Consumption is expected to rise by 0,9% to 188,4 million tons. According to the organization, the global sugar shortage this season amounts to 1,1 million tons. That is 800.000 tons less than outlined in previous forecasts. The figures are striking, because most countries show a decline in production. Bad weather conditions are largely responsible for this.
For example, meteorologists say that Thailand can expect heavy rainfall in the main growing areas in the coming months. The country also suffers from high humidity, which hinders the progress of the harvest. StoneX expects sugar production of 9,9 million tonnes, a reduction of a further 7,5% compared to the previous forecast. China faces similar problems. The harvest forecast for this region has been reduced by 100.000 tons, to also 9,9 million tons. And Australia also struggles with high humidity. The yield for this season is reported to be 4,3 million tons. A decrease of 1,1% from one season earlier. The Brazilian harvest drops by 11,9% to 31,4 million tons.
India brings positivity
The fact that an increase in world production is expected is entirely due to recent figures from India. The climatic conditions here are extremely favorable; with slightly less rain than normal. Market agency StoneX has therefore adjusted the harvest forecast for this country upwards by 5,4%, to 33,2 million tons. That is 6,5% more than one year earlier. This upward adjustment immediately negates all of the above negative scenarios. The Indian Sugar Mills Association endorses the positive sentiment with an export forecast of 7,5 million tonnes. That is 400.000 tons more than last year.
India is not the only important growing area that shows positive results. The production prospects for the European Union are also positive. The European Commission assumes a yield of 16,1 million tons of sugar. That is an increase of 11% compared to last season. StoneX endorses this and – after calculations – even works out at 17,2 million tons (+11,9%). In Mexico, a yield of 6,1 million tons is also expected, which represents an increase of 6,9% compared to the previous season.
Nevertheless, the price remains very high
However, the decrease in the global sugar shortage is not enough to drive the sugar price down. On Tuesday, March 15, the quotation closed at €476,39 per tonne. Although it is a decrease, it is still considerably higher than at the end of February; then the quotation was around €440 per tonne. This has everything to do with the high energy prices, as a result of the war between Russia and Ukraine. One barrel of Brent oil is still trading at a price level around $100 per barrel. This makes sugar cane extremely interesting for the ethanol industry, at the expense of sugar production.