Sugaronline Editorial - Opening the floodgates By Meghan Sapp

Published: 03/16/2018, 1:31:00 PM

When everybody's an exporter, there's only one way for the market to go.



When everybody's an exporter, there's only one way for the market to go.

 


It’s no surprise that the shortest deficit cycle in decades is well and truly over, as shown by whites futures sliding to 2.5 year lows this week. Brazil is taking the responsible route by boosting its ethanol demand under its RenovaBio programme, but unfortunately others aren’t following their lead.

At last India is admitting to what the market has known for quite some time, that their production swing has swung off the charts towards 30 million metric tonnes this season. The need to export was a given, with ISMA asking for export tariff exemptions for around 1.5 million tonnes, but now the government is saying that could be as much as 4 million tonnes. That’s 4 million tonnes the market doesn’t need and could outweigh the 3 million to 5 million tonnes Brazil might turn into ethanol.

With Pakistan already well into its export programme of 2.75 million tonnes with 1.2 million tonnes already out the door, between it and India, that’s a lot of sugar that needs to be placed in a region with deficit markets that require tricky logistics and not necessarily the demand for the quality on offer. Pakistan may only export vast quantities this season in an attempt to boost domestic prices and keep farmers growing cane rather than switching to other crops, but they’re already losing planted area. With the world awash in sugar, letting those farmers go would be nothing short of a kindness to the market.

Myanmar also announced this week that it would reinstate its re-export programme after having had its wrists slapped by the Chinese for pushing more sugar into its market than it would have liked, leaving Myanmar’s own market flooded. With its neighbour Thailand already producing a fifth more than compared to this time last year, its production looks likely to lean more towards 13 million tonnes than 12 million tonnes, leaving no choice but to boost exports as well.

Add to that mix the European Union exporting like it was their last day on Earth, or their first year back in the market after a long absence, and Ukraine following suit, the dog pile of sugar on the global market is set to do little for those producers who can still eek out a profit below 13 cents and perhaps weed out many of those who need 15 cents and higher. At 10 cents, real market consolidation could begin to occur. Brazil is best placed to shield itself from the upcoming bloodbath, focusing on its domestic market and ethanol production, leading with an example others would do well to follow.

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