indian sucrose ltd Management discussions


GLOBAL SUGAR MARKET

The London white sugar futures are currently at 27.4 (cents per pound): the highest for eleven and a half years. These bull market prices are the result of the downturn in sugar production of the worlds major sugar producing countries: Brazil, China, India, and Thailand.

Global beet sugar production reached 37.2 min tonnes from the 2022/23 campaign and global cane production resulted in 145.5 min tonnes of sugar being produced from the 22/23 harvest. Global sugar production for 2022/23 reached 182.7 min tonnes, the lowest for three years.

The northern hemisphere cane crush for 22/23 is only now reaching its tail end, the southern hemisphere cane crush for 23/24 has just started and the beet sowing for the 23/24 campaign is in the ground. We expect the coming year will see increased production from Brazil, China, Europe, and Pakistan, despite the expected drop in production from Thailand.

After two and a half years of a La Nina climate pattern, we are moving to an El Nino formation. Expected this summer, this would result in the Indian and Thai off-season being drier and the Brazilian harvest wetter. For the 2023-24 season, we estimate an increase in global beet sugar production to around 39 min tonnes and an increase in global cane production to 152 min tonnes, making total global sugar production 191 min tonnes.

UNITED KINGDOM

Last October it was estimated that British Sugar would produce 970,000 tonnes of beet sugar, despite the very dry growing conditions. By the end of the 2022-23 beet campaign they only produced 804,000 tonnes of beet sugar, compared to 1 min tonnes in 2021-22.

The beet sowing for 2023 is now complete, with the area under beet increasing 13%, after a challenging wet spring. The farmers have agreed a ?40 per tonne price for the 23-24 campaign, with Defra allowing 60% of the beet to be treated with neonicotinoid to protect the beets from aphid virus ye I lows. The plan is to start delivering the harvested beets early in September to compensate for the 22-23 shortage.

With tight UK supply lines, British Sugar has taken the unprecedented move of not only buying imported sugar, but also buying from UK rival Tate & Lyle, who refine white sugar from imported raw cane sugar. We estimate that British Sugar could produce 950,000 tonnes for the 23-24 campaign.

BRAZIL

Rains have significantly impacted on the start of cane crush for the 2023-24 season, which began in April. However, it was estimated that Brazils cane sugar production will rise to 42.3 min tonnes in 23-24 if the weather improves during the crushing season. This is despite farmers switching to more profitable crops like corn and soya beans, resulting in the country having its smallest area under cane for twelve years.

If this tonnage is achieved, it will be Brazils second highest annual production after the record breaking43.3 mlntonnes in 2020-21.This compares with 22-23 reduced tonnage of 38.7 min tonnes due to the slow start to the cane crush, and dry weather damaging canes.

Realistically, only Brazil can alleviate the global tight supply lines, bathe predicted El Nino weather patterns bring wet weather and disruptions to the harvest, the cane yields and the transportation networks: much like the picture now, at the start to this seasons harvest. With gas prices being more competitive compared to ethanol, mills have diverted the cane mix to sugar production.

AFRICA

Pooryields due to rhizomania disease led to Egypts beet sugar production falling to 1.6 min tonnes in 2022/23, although it is expected to rise again to 1.7 min tonnes in 2023-24 with the continued expansion of the industry. The 2022/23 cane sugar harvest is expected to finish in June, and with the area under cane the same as last season, we expect cane sugar production for 22-23 to be approximately 924,000 tonnes. With the government increasing the procurement price for 2023-24, we estimate that Egypt will produce 1 min tonnes of cane sugar.

The continents largest producer—South Africa—is currently experiencing several challenges. Cyclones and higher than usual rainfall damaged last seasons crop with 2 min tonnes of cane sugar being produced in 22/23. Despite improved growing conditions and better yields forecast for 23/24, farmers have been planting other more profitable crops. Two mills have closed and a further two millers have an uncertain future. That reduced milling capacity could result in carry-over cane (cane not harvested) and a small increase in cane sugar production for the 23/24 crop, which we estimate to be 2.1 min tonnes.

Despite an increased area under cane and improved irrigation, Eswatini/Swaziland also suffered from unseasonable rainfall just before the cane harvest, making the fields inaccessible and delaying crushing. Eswatini still managed to produce 644,000 tonnes of cane sugar in 2022-23 and it is estimated to further increase to 675,000 tonnes in 2023-24.

USA & MEXICO

In the south, Florida and Louisiana experienced record cane yields and the biggest ever cane sugar production figure of 3.7 min tonnes for 2022-23, despite a slight decline in the Texas region. High cane prices will encourage farmers to continue growing cane, so we estimate that this seasons crop will produce 3.7 min tonnes for 23-24.

The 2022-23 Mexican cane harvest is due to finish by the end of June, a month earlier than last season. We estimate cane sugar production for 2022- 23 will fall to 5.7 min tonnes from 6.6 min tonnes in 20S21-22.The drought throughout the cane growing season coupled with a lack of fertilisers has resulted in the lowest cane yield since the 1960s. We forecast that improved weather conditions and available fertiliser will seethe 2023-24 cane sugar production recover to around 6.3 min tonnes, with exports to the United States at around 1.1 min tonnes.

INDIA

Estimates for Indias sugar production from the 2022-23 cane crop are below the decreased figure we estimated last October. The 35.6 min tonnes we expect is much lower than the 39 min tonnes produced in 2021-22. Any further exports onto the global market this season seem unlikely, despite India having an export quota of 6 min tonnes for the world market.

Despite an increased area under cane, low rainfall during the growing season and too much rain just before the harvest began resulted in lower cane yields. For the 2023-24 crop, the area under cane has increased again. If the monsoon rainfall is average, we expect India to produce 36.4 min tonnes of sugar. However, that figure only holds if there are no major increases in cane juice or molasses diverted into ethanol production. In 22-23 the equivalent of 4.5 min tonnes of sugar was used for ethanol production. In 23-24, we expect that figure to be 3.78 min tonnes.