India's sugar harvest in the 2023-24 cycle is expected to be 31,4 million tonnes

According to analysis by hEDGEpoint Global Markets, however, it was interesting to note that sugar remained resistant to corrections. “The reasons for this were mainly speculative and macro related. Although the sweetener faced some corrections at the beginning of the week, with the strength of the US dollar given the low performance of the country's economic indices and the expectation of a more aggressive stance from the Fed, as soon as the energy complex recovered, sugar also found new breath.

With October due in March, which is mainly driven by harvest conditions in the Northern Hemisphere, there doesn’t seem to be much reason to reduce so soon”, says Lívea Coda, Sugar and Ethanol analyst at hEDGEpoint Global Markets. “However, we must remain cautious about the extent of the uptrend. In this report we discuss India’s climate and why we kept our production unchanged at 31,4Mt,” she adds.

In July this year, the market was betting on a normal climate and production exceeding 33Mt for the country. At that time, hEDGEpoint argued in its reports that it was too early to assert normality, especially with El Niño lurking. “In this context, we estimate 31,4Mt and have not changed our numbers since then. We were pessimistic, as some effect of the weather pattern could lead to poor sugarcane development and loss of sucrose and, therefore, we were almost 2Mt below the market average”, says the specialist.

El Niño was confirmed, the monsoon was delayed. There was little rain in July and August faced the worst rainfall in 100 years! “You may be wondering why we haven’t changed our vision. Well, looking at the Standardized Precipitation Index (SPI) – an important and well-accepted index for drought monitoring used by the Indian Ministry of Agriculture to define whether a region was affected by drought or not – it is possible to notice that even with a In severe August, the main producing states, such as Uttar Pradesh, Tamil Nadu and Gujarat, suffered little during the entire period (June-September)”, he says.

“Of course, many districts in Maharashtra and Karnataka have been severely affected, but looking at the bigger picture, this production of less than 30Mt is still difficult to comprehend: India has surprised the market positively in the past, more than once!” , it says.

According to the analyst, considering 31,4Mt, India could have some surplus sugar to export, “but we understand – as has already been discussed during our weekly reports – that the decision is highly political.” With the ethanol program, food security concerns amid the election year and rising fuel prices, the idea of ​​no exports is very likely indeed. India would, in this case, be opting to restock and get closer to the usual three-month supply limit of consumption.

“Therefore, although we have not changed our production, so that our trade flows reflect what has been priced, we assumed the absence of Indian exports as a base case. Part of the reduction observed in India's estimate (-1,3Mt exports) was offset by greater availability in Brazil, but the latter is far from being enough to avoid a deficit during the first and second quarter of 2024, which means a tendency for increase for the March 2024 contract”, he explains.

“Note that other changes have been made to our global sugar balance – we have revised Thailand and Mexico availability downward in 23-24, Brazil and Ukraine upward, and have adhered to the latest USDA changes to harvest conditions from the USA, among others – points for discussion in future reports”, he concludes.

For the analyst, it is clear that, contrary to what happens in the raw sugar market, Brazil offers little comfort to the white market, a trend that contributes to the maintenance of a high premium for white and that should persist over the last few years. months of the year and, possibly, at the beginning of the next.

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