CSR Sugar SUGAR MARKET OUTLOOK PRESENTATION January 2006 - - PDF document
CSR Sugar SUGAR MARKET OUTLOOK PRESENTATION January 2006 Presentation compiled with the assistance of Czarnikow Sugar. For further information on the global sugar industry, please refer to the Czarnikow website www.czarnikow.com. Sugar Market
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SUGAR MARKET OUTLOOK PRESENTATION January 2006
Presentation compiled with the assistance of Czarnikow Sugar. For further information on the global sugar industry, please refer to the Czarnikow website www.czarnikow.com.
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Accelerating sugar price – a new dynam ic in the m arket, or just another blip? W hat are the im plications for the m arket and the Australian industry?
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5 10 15 20 25 30 35 40 45 48 50 52 54 56 58 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 c per lb Cuban Missile Crisis Oil Price Shock Oil Price Shock Last Post-Boom Trough Suez Crisis Korean War Recent Range
New York Spot Prices
50 55 60 04
1990’s range
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1 . Three fundam entals:
2 . Short term variables:
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2 0 m Production 2 m Preferential I m ports 1 6 m Consum ption 6 m Exports
Excess production exported
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1 4 m Production 3 m I m ports 1 6 m Consum ption
1 m Exports
Excess production retained in Europe
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0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 97/98 98/99 99/00 00/01 01/02 02/03 03/04 04/05 05/06 06/07 mtwv Record exports in final year WTO limit of 1.2735m tonnes for EU25 Politically driven long term decline
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9 Trade estimated: 26m tonnes
5 0 0 0 1 0 0 0 0 1 5 0 0 0 2 0 0 0 0 2 5 0 0 0
Brazil Thailand EU Australia Guatem ala South Africa Others
'0 0 0 m ttq
World Sugar Exports : 1990
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5 0 0 0 1 0 0 0 0 1 5 0 0 0 2 0 0 0 0 2 5 0 0 0
Brazil Thailand EU Australia Guatem ala South Africa Others
'0 0 0 m ttq
World Sugar Exports : 2005/ 6 Record Final EU exports
Trade estimated: 40m tonnes
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5 0 0 0 1 0 0 0 0 1 5 0 0 0 2 0 0 0 0 2 5 0 0 0
Brazil Thailand EU Australia Guatem ala South Africa Others
'0 0 0 m ttq
World Sugar Exports : 2006/ 7 EU exports fall to WTO limit
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Total 4 5 s
Circa 7 0 %
Total White Trade 17m tonnes 45s (refined) 11m tonnes
Others Dubai Brazil Thailand Malaysia South Africa South Korea
EU
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Total 4 5 s
Circa 7 0 %
Total White Trade 17m tonnes 45s (refined) 11m tonnes
Others Dubai Brazil Thailand Malaysia South Africa South Korea
EU 14
Investment in refining capacity in response to anticipated fall in EU exports Refinery buyers have lowered price elasticity
Re-emergence of price insensitive buyers (similar to EU / US in historic price spike scenario)
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Brazil USA EU China India Other Europe Other Asia Other Americas
World Production 38 billion litres
(Source: FO Licht)
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Interest in Fuel Ethanol is strengthening on the back of strong oil prices
1 .5 bln litres per annum by 2 0 1 2
policy, but still has reservations about relying on Brazil as a single source supplier
adopting an E5 policy, to soak up local surplus m olasses
governm ent is reluctant to im plem ent unless it is price com petitive w ith gasoline
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8.00 9.00 10.00 11.00 12.00 13.00 14.00 15.00 16.00 Jan-05 Apr-05 Aug-05 Dec-05
US c/lb
40.00 50.00 60.00 70.00 80.00
$US/BRL NY11 Prompt Crude Oil
8.00 9.00 10.00 11.00 12.00 13.00 14.00 15.00 16.00 Jan-05 Mar-05 Jun-05 Sep-05 Dec-05
US c/lb
120.00 140.00 160.00 180.00 200.00 220.00 240.00
$US/100G NY11 Prompt Gasoline
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20,000 40,000 60,000 80,000 100,000 120,000 Mar-03 Jun-03 Sep-03 Dec-03 Mar-04 Jun-04 Sep-04 Dec-04 Mar-05 Jun-05 Sep-05 Dec-05 m onthly vehicle sales
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1.5m FFVs will be on the road by the start
By end 2010 we forecast this could rise to 7.6m – around 30% of the fleet. Potentially 22 bln litres of domestic demand by 09/10.
20,000 40,000 60,000 80,000 100,000 120,000 Mar-03 Jun-03 Sep-03 Dec-03 Mar-04 Jun-04 Sep-04 Dec-04 Mar-05 Jun-05 Sep-05 Dec-05 m onthly vehicle sales
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Ethanol returns in Brazil linked to sugar prices Flex fuel cars deliver a genuinely elastic market for the Brazilian sugar industry Most fuel ethanol programs are domestically oriented, and based on the most economic local feedstock:
Corn based
Sugar based
Molasses based
Global trading in fuel ethanol remains small, but could grow rapidly if oil prices continue to climb
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20,000 40,000 60,000 80,000 100,000 120,000 140,000 06/07 04/05 02/03 00/01 98/99 96/97 94/95 92/93 90/91 88/89 86/87 84/85 82/83 80/81 78/79 76/77 74/75 72/73 70/71 '000 mtrv China US Australia Thailand Former USSR South Africa Philippines Colombia Guatemala Cuba EU India Brazil
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0.0 5.0 10.0 15.0 20.0 25.0 30.0 Fortnightly Crushing Volume 2 4 6 8 10 12 14 16 18 20 May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mch April Crushing Days lost due to Rainfall average no. of days lost due to rainfall 04/ 05 05/ 06 Projections '05/ 06
The 2005/ 06 season has been quite disappointing – down 10m tonnes on initial forecasts
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500 1,000 1,500 2,000 2,500 Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Brazil Exports 05/ 06 Brazil Exports 04/ 05
Strong early season demand has front end loaded exports this year TOTAL exports during 2005/ 06 are likely to be around 16.5m tonnes dow n from 17.2 last year
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CS NNE (May/Apr) Brazil (May/Apr) 1,861 570 2,431 13,593 1,803 15,396 11,340 1,440 12,780 1,781 602 2,383 860 90 950 250
Stocks 30 April, 2005 1,223 491 1,714 14,470 1,553 16,023 11,990 1,485 13,475 2,050 450 2,500 890 92 982 430
333 447 780 Other Uses Transferences Stocks Forecast 30 April, 2006 2005/06 Crop Production Fuel Consumption Exports Other Uses Transferences 2004/05 Crop Production Fuel Consumption Exports Stocks 30 April, 2004
Stocks will be very low at the end of the season given monthly demand of
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30,000 35,000 40,000 45,000 50,000 55,000 60,000 65,000 70,000 75,000 80,000 1994/95 1995/96 1996/97 1997/98 1998/99 1999/00 2000/01 2001/02 2002/03 2003/04 2004/05 2005/06* '000 MT 3,000 3,500 4,000 4,500 5,000 5,500 6,000 6,500 7,000 7,500 8,000 '000 MT Sugar Cane
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5,000 10,000 15,000 20,000 25,000 93-94 94-95 95-96 96-97 97-98 98-99 99-00 00-01 Feb-06 Mar-06 Apr-06 May-06 05-06 f '000 MT
Imports Exports Consumption Production
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0.20 0.30 0.40 0.50 0.60 0.70 0.80 0.90 1.00 1.10 Jan-96 Dec-97 Nov-99 Oct-01 Sep-03 Aug-05 AUD & BRL 20 25 30 35 40 45 50 55 60 THB AUD/USD BRL/USD USD/THB (RHS)
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100,000 200,000 300,000 400,000 500,000 600,000 2002 2003 2004 2005 Lots 5.00 7.00 9.00 11.00 13.00 15.00 17.00 US c/lb Open Interest NY11 Prompt
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30,000 60,000 90,000 120,000 150,000 180,000 210,000 01/10/02 12/11/02 24/12/02 04/02/03 18/03/03 28/04/03 10/06/03 22/07/03 02/09/03 14/10/03 25/11/03 06/01/04 17/02/04 30/03/04 14/05/04 22/06/04 03/08/04 14/09/04 26/10/04 07/12/04 18/01/05 01/03/05 12/04/05 31/05/05 12/07/05 19/08/05 04/10/05 11/11/05 27/12/05 5 6 7 8 9 10 11 12 13 14 15 lots c per lb Speculative Open Interest 1st Delivery New York No.11
Record spec. participation in the sugar market – in particular large hedge funds.
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200 600 1000
Q4 '0 5 Q1 '0 6 Q2 '0 6 Q3 '0 6 Q4 '0 6 Q1 '0 7 Q2 '0 7 Q3 '0 7 W hites Raw s
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A bullish fundamental outlook for March’2006
200 600 1000
Q4 '0 5 Q1 '0 6 Q2 '0 6 Q3 '0 6 Q4 '0 6 Q1 '0 7 Q2 '0 7 Q3 '0 7
Raw sugar well supplied though demand will roll back from Q2
W hites Raw s
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200 600 1000
Q4 '0 5 Q1 '0 6 Q2 '0 6 Q3 '0 6 Q4 '0 6 Q1 '0 7 Q2 '0 7 Q3 '0 7 W hites Raw s
Final Year of Large EU Exports. The new price environment
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$24 $34 $44 $54 $64 $74 $84 Jul-05 Sep-05 Oct-05 Dec-05 USD per tonne Mar06/Mar06 May06/May06 Jul06/Aug06 Oct06/Oct06 38
2 4 6 8 10 12 14 16 18
| 82 | 83 | 84 | 85 | 86 | 87 | 88 | 89 | 90 | 91 | 92 | 93 | 94 | 95 | 96 | 97 | 98 | 99 | 00 | 01 | 02 | 03 | 04 | 05
2 4 6 8 10 No.11 Raw Spot Price Stock Change US c/lb Million tonnes
Prices must rise to stimulate production or choke off consumption.
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Up to 30 new mills under construction in Brazil, 13 due to start this season, and another 50 expected by 2010 Significant new cane production has at least 2 year lead time Changes in Europe make rapid expansion from beet unlikely Will the development pipeline be sufficient to meet projected demand? If not, is it likely that Brazil will switch cane from ethanol to sugar?
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4.00 6.00 8.00 10.00 12.00 14.00 16.00 18.00 Jan-04 May-04 Aug-04 Dec-04 Mar-05 Jul-05 Oct-05 US c/lb ESALQ NY11 Equivalent Ex Mill NY11 Ex Mill Ethanol ex Mill
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At what price will sugar consumption shrink significantly? Domestic sugar prices are protected in many large markets, and are generally still well above world market. Will Brazil be prepared to significantly reduce its mandated ethanol blend ratio, and at what price level?
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Supply tightness for the next couple of years should support medium term price outlook Expanded growth opportunities in cane and milling where suitable farmland is available Longer term, increased volatility is likely, due to:
Increased geographic concentration Greater dependence on cane rather than beet Increased speculative activity in the market Growth in the fuel ethanol market MAY mitigate these factors
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More emphasis on active hedging strategies to manage volatility Potential for entry to more high quality refined sugar markets, as EU whites exit Improved prospects for sensible, moderate scale milling expansion opportunities Maintain focus on reform and restructure in Queensland
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excellent grow ing conditions in the Herbert
due to late finish of the season in Decem ber 2 0 0 5
but likely to be above A$ 3 0 0 per tonne
its future sugar price exposure
now hedged at approxim ately A$ 3 2 0 per tonne
14.2 15.0 15.4
Cane crushed (mt)
255 8.1 14.5% 2.2 2005 229 6.4 14.7% 2.1 2004 NA 10.6 (1) 14.0% 2.1 2006
CSR final price (YEM) NY11 average US cents per lb CCS% of sugarcane Raw sugar production (mt) Year ended March (YEM)