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Murray News

Brazil’s supremacy in sugar is growing

The country may account for more than half of exports in the 2022/23 global season

10/17/2022


Sugar production in Europe; Brazil is expected to export 30 million tonnes of the product in 2022/23 season — Foto: Dario Pignatelli/Bloomberg

Sugar production in Europe; Brazil is expected to export 30 million tonnes of the product in 2022/23 season — Foto: Dario Pignatelli/Bloomberg

Brazil is expected to continue to dominate the sugar market in this global season 2022/23, which tends to be marked by a small surplus in production. The latest rains in the Center-South of the country contribute to this scenario, which have helped in the development of crops for the next local season.

Brazilian mills may export 30 million tonnes of sugar in the 2022/23 local season, estimates Plinio Nastari, president of Datagro, a consultancy firm specialized in agriculture. If confirmed, this volume would be more than half of the sugar to be traded in the current international cycle — the consultant foresees global shipments of 57 million tonnes.

With this, the distance between the shipment volumes of Brazil and India, the second-largest exporter of the commodity, is likely to grow. The authorities in New Delhi indicated that they should issue export licenses for 8 million tonnes in this cycle, below the 11 million of last year’s season.

India will probably produce 36 million tonnes of sugar this harvest, already considering 4.5 million tonnes converted to produce ethanol, according to Datagro. India’s biofuel program has limited the country’s ability to compete with Brazil in the sugar market. Since 2017, the production of ethanol has seized 15 million tonnes of sugar, the consultancy says.

In Brazil alone, the Center-South may produce 36 million tonnes in the next local crop (2023/24), and there are still the volumes of North and Northeast regions. The increase of the Brazilian relevance in the global market raises the impact of climate and fuel prices in the country on global prices.

The difference between global supply and demand in 2022/23 is expected to be narrow, 1.87 million tonnes, Datagro predicts. The calculation, presented last week at a dinner with executives of mills that Citi Brazil promoted in Ribeirão Preto, in the countryside of São Paulo state, is similar to others in the market, such as that of Itaú BBA, which recently forecast a surplus of 2.1 million tonnes.

But this slight slack can be dilated. Mr. Nastari doesn’t rule out that production in South-Central Brazil is 2 million tonnes higher than the initial forecast, which would increase the surplus to 3.8 million tonnes.

Some mills already signal a scenario of robust supply in the next harvest. Mill Coruripe, for example, believes that the rains are favoring its crops so much that there may be more cane than it can crush in a normal cycle.

“If the rains continue, there will be 1 million tonnes more than capacity,” says CEO Mario Lorencatto. Today, Coruripe can grind up to 15.2 million tonnes per harvest in its five plants in the states of Minas Gerais and Alagoas. The company is already expanding its capacity in Limeira do Oeste, in Minas Gerais, by 1 million tonnes, and will add a sugar plant to this distillery.

Investments like that, however, are the exception in the sector. “The companies are reluctant [to invest in capacity] because of the increase in interest rates,” says André Cury, in charge of the Commercial Bank of Citi Brazil. According to him, even with the good prices last year, the mills opted to generate cash and reduce leverage, which is currently close to 1.15 times.

In São Paulo, the productive picture is also favorable. Usina Santa Isabel, which has two units in the state, expects, with the crushing of this season and the next, to recover a good part of the losses with the 30% decrease it had in the last cycle, says chief financial officer Fabio Montecchio. In the current cycle, crushing may reach 5.6 million tonnes.

Despite the ample supply, the international trade scenario continues to favor price increases, believes Mr. Nastari. The prices continue 30% above the level of two years ago, near 17.8 cents a pound, and the consultant sees room to reach 19.50 cents a pound until March.

In part, price maintenance is in global demand. Datagro estimates that consumption will increase by 2.5%, above the average of the last decade, which was 1% per year.

*By Camila Souza Ramos — São Paulo

Source: Valor International

https://valorinternational.globo.com/
17 de October de 2022/by Gelcy Bueno
Tags: Brazil’s supremacy, growth, sugar
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