WORLD SUGAR MARKET Jos Orive Executive Director International - PowerPoint PPT Presentation

WORLD SUGAR MARKET José Orive Executive Director International Sugar Organization

A year ago world prices hit bottom 26.00 25.00 24.00 23.00 22.00 21.00 20.00 ISO White Sugar Price Index US cents/lb 19.00 18.00 17.00 16.00 15.00 14.00 ISA Daily Price 13.00 12.00 11.00 10.00 9.00 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 May-19 Jun-19

For two consecutive years world sugar balance has been characterized by statistical surplus JULY 2019 2018/19 2017/18 2.141 9.726 Surplus (mln t)

A possible end of the surplus phase in 2019/20 World Sugar Surplus/Deficit 2009/10-2020/21 10 8 6 mln tonnes 4 2 0 -2 -4 -6 -8 2019/20

Recent years have shown a readable trend towards a World Population and Sugar Consumption slow but steady erosion in those rates from an Growth Rates (in %) average of about 2% in the mid-2000s to the current 4.50 1.0400 level below to 1.5%. 4.00 1.0300 3.50 Sugar consumption 3.00 1.0200 A considerable part of losses in consumption growth population 2.50 rates can be attributed to a slowing down in global 1.0100 2.00 population growth. 1.50 1.0000 1.00 0.9900 0.50 Sugar and Health debate starts taking its toll 0.00 0.9800 2019/20 - growth rate close to the long term-average consumption growth population growth of 1.39% Linear (consumption growth) Linear ( population growth) 2019/20

Consumption Growth Suggesting a 1.39% ~177.9 mln t +1.39% growth in world sugar use and flat world sugar production, Current ~177.6 mln t Production world S&D look well (2018/19) balanced. But how plausible is a _________ no-change production assumption? 0.3 mln t Deficit 2019/20

Sugar export availability in 2018/19 by countries of origin (1,000 tonnes, tel quel) 25,000 20,000 15,000 10,000 5,000 0 Brazil – the world’s largest sugar exporter

Brazil: sugar share in production mix, 2010/11-2019/20 (in %) 52 46 40 34 2018/19 (Oct/Sep) – 28.6 mln t + 4.5% 2019/20 (Oct/Sep) – 29.9 mln t Brazil – the world’s largest sugar exporter

2018/19 output industry’s projections: July 2018 – 35.0 mln tonnes Oct 2018 – 32.4 mln tonnes Jan 2018 – 30.7 mln tonnes May 2018 – 33.0 mln tonnes India – the world’s largest sugar producer and consumer

India – the world’s largest sugar producer and consumer

50 mln cane growers Guaranteed prices for cane (2011/12 - INR1450/ т USD29/t 2015/16 - INR2300/ т USD/38t 2018/19 - INR2750/ т USD41/t 2019/20 - ??? ... But cane prices are not correlated to sugar prices ... Millers’ arrears to farmers (June 2019) INR190 bln (USD2.7 bln) India – the world’s largest sugar producer and consumer

Production to decrease to 29 mln tonnes Deficient monsoons Cane arrears 2.4 mln tonnes + stocks (~15 mln t – ISMA) ISMA targets 7 mln tonne exports India – the world’s largest sugar producer and consumer

March 2019 – The WTO dispute settlement body received three submissions from Brazil, Australia and Guatemala about sugar and sugarcane in India. The specific measures that are subject of the request for consultation include the fixing of Minimum Indicative Export Quotas (MIEQ), minimum selling prices (MSP) in the domestic market and increasing fair and remunerative cane prices (FRP), which is lifting production above domestic requirements. Can ethanol reduce India’s sugar surplus? YES, but it may take some time, particularly due to the necessity to reform the cane payment system. Ethanol production from cane priced at more than USD40/tonne is not economically viable option taking into account abundant molasses supply… India – the world’s largest sugar producer and consumer

The EU crop monitoring unit MARS currently forecasts EU - Sugar Production and Beet sugar beet yields at 75.4 Areas tonne/ha 25000 1800 up 11% from 2018/19 and 1600 20000 1400 up 0.5% from the 5-year 1200 average. 15000 1 000 tonnes 1000 1 000 ha 800 T he European Commission 10000 600 estimates planting area in 400 5000 2019/20 to reduce 200 by 4.6% 0 0 Improvements in yields allow us to suggest a Sugar Production Beet Areas modest rise in sugar output by about 3.5% despite a decrease in beet area. EU-28 – the world’s third largest sugar producer

200 250 300 350 400 450 500 550 Jan-2017 Feb-2017 Factory Prices (EUR/tonne) Mar-2017 EU Average Domestic Ex Apr-2017 May-2017 Jun-2017 Jul-2017 Aug-2017 Sep-2017 Oct-2017 Nov-2017 Dec-2017 Jan-2018 Feb-2018 EU-28 – the world’s third largest sugar producer Mar-2018 Apr-2018 May-2018 Jun-2018 Jul-2018 Aug-2018 Sep-2018 Oct-2018 Nov-2018 Dec-2018 Jan-2019 Feb-2019 Mar-2019 Apr-2019

2018/19 output industry’s projections: Thailand – Sugar Production and Dec 2018 – 13.0-13.5 mln tonnes Consumption May 2018 – 14.4 mln tonnes 16 Ending stocks 14 Sep 2016 – 4.3 mln t 12 Sep 2019 – 6.8 mlnt 10 8 6 4 2 0 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 production consumption Thailand – the world’s second largest sugar exporter

Thailand – Sugar Production and Consumption 16 For 2019/20 we assume a 1.5 mln tonnes 14 drop as poor cane prices at a time of rising 12 prices for cassava – a key competitor for 10 cane cultivation – are estimated to have 8 driven farmers to switch between crops… 6 4 … but exports may be not effected as stocks 2 are high 0 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 production consumption Thailand – the world’s second largest sugar exporter

Consumption Growth +1.39% ~177.9 mln t Production ~174.4 mln t 2019/20 _________ Deficit 3.5 mln t However, considerable surplus stocks are still overhanging the market and still need to be absorbed before prices can return to more remunerative levels for producers. 2019/20

CONCLUSIONS High Accumulated Stocks will have to be absorbed by the market before we can see any improvement on prices. Government policies will continue to support the sugar sector, mainly for political reasons. The weather will play a vital role as it's the key element that could provoke variations in production and perhaps some significant reduction in global output. The War Against Sugar will continue, it's CRUCIAL the sector communicates better and is able to convey proactive messages based on facts & sound scientific evidence.

Thank you for your attention! www.isosugar.org 28 th ISO Seminar 26-27 November 2019 – London “Sugar – it’s about people”