World Sugar Market Outlook

Transcription

1 World Sugar Market Outlook 28 th of September 216 Platts conference New Delhi Benoît Boisleux 1

2 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Evolution of world prices NY 11 (2 nd month continuation) Cts/lbs NY 2nd month (Cts/Lbs) NY 2nd month (Real/lbs) Real/lbs

3 South Brazil sugar crop Sao Paulo state has noticed a dry start of the 16/17 season However 2 rainy periods were noticed in May/June and in 2 nd half of August CS ATR (kg/tc) The ATR has been negatively affected by the wet period Has this conducted to an early peaking of the sucrose content? 13/14 14/15 15/16 16/17 4 Years AVG 3

4 South Brazil sugar crop (2) YRS AVG In addition, reported yield in South Brazil has been disappointing in August and came below historical trend line If this is confirmed, 16/17 average yield could come 7 % below last year and 1% below 5 years average What has exactly been the frost impact? 55 Apr May Jun Jul Aug Sep Oct Noc Dec 16/17 Center South Brazil Sugar crop scenario table Production in Mio tons Tel Quel 16/17 cane crop (Mio Tons) ATR (kg of sugar/ton) ,69 33,817 33,945 34,72 34,2 34,328 34,455 34,583 34, ,977 34,16 34,235 34,364 34,492 34,621 34,75 34,878 35, ,265 34,395 34,525 34,655 34,785 34,914 35,44 35,174 35, ,553 34,684 34,815 34,946 35,77 35,28 35,339 35,47 35, ,841 34,973 35,15 35,237 35,369 35,51 35,633 35,765 35, ,129 35,262 35,395 35,528 35,662 35,795 35,928 36,61 36, ,417 35,551 35,686 35,82 35,954 36,88 36,222 36,356 36, ,75 35,84 35,976 36,111 36,246 36,381 36,517 36,652 36,787 In this environment, the potential of CS should be between 34.9 and 35.5 Mio tons We are working with 35.2 Mio tons 4

5 India crop Rains in main production areas have recovered substantially since July, which should help yield and extraction rate to recover from last year s level 16/17 crop will be negatively impacted by : - Loss in area of around 5% - Higher seed diversion for re-plantings Ton/ha Maharashtra Yields mm - Older cane profile due to limited plantings last year 14 1 Yields Rains 12 1 We assume 16/17 crop will reach around 22.5 Mio tons (white value) /1 211/12 213/14 215/16 5

6 India could need about 1 mio tons of import in 16/17 Estimated Indian sugar consumption in white value 27, 25, 23, 6.% 4.% 2.% History has proven that higher prices environment impacts Indian consumption negatively 21, 19,.% -2.% Indian consumption forecast will be quite critical to understand import requirement, if any. 17, -4.% Theoretical 16/17 Indian import requirements in Mio tons white value Based current price, we see higher probability for 1 Mio tons import scenario Timing of the imports will define the sugar quality required 6

7 Will China remain a significant importer in 217? Based current price, we assume China should release 1.5 Mio tons of reserve stocks in 16/17 However, over 3 K tons release per month is logistically possible Other key unknowns : - Out of Quota import duty hike? - Consumption growth? HFCS consumption still favored by price environment - Un official imports? Border control Chinese sugar deficit & imports in Mio tons white value S&D Deficit Import (including unoffical) - 12/13 13/14 14/15 15/16 16/17

8 Overview of major countries production EU production will rebound but not to the initial expectations. EU stocks should remain tight in 16/17. Drought in Thailand has affected 2 crops in a row Russia and FSU region could notice a record crop in 16/17 Major countries production Production in Mio tons raw value Oct -Sept 4, 35, 3, 13/14 14/15 25, 2, 15, 15/16 16/17 1, 5, - South Brazil India EU Thailand China Russia 8

9 Global production rebounding smoothly in 16/17 15/16 global production dropped on the back of El Nino impact + extended low price environment Despite lower Indian crop, 16/17 should notice a small rebound in production driven by EU/Central America/FSU. High price environment will have limited effect on 16/17 but should however trigger a significant reaction in 17/18 Global production per region in Mio tons raw value 2, 8% West Africa 18, 6% Middle East 16, 4% East Africa / Yemen 14, 2% Southern Africa 12, 1, 8, 6, % -2% -4% -6% North Africa / Med FSU/Central Asia EU/Balkans North_Central America Indian Subcontinent 4, -8% East Asia_Oceania 2, -1% South America 7/8 8/9 9/1 1/11 11/12 12/13 13/14 14/15 15/16 16/17-12% 'Production growth (%) 9

10 Early view for 17/18 crop rebound? Basis current prices, main sugar producers could enjoy around 4 % return on cost of production in 217 Farmers still have time to act via more plantings & higher inputs for 17/18 (Oct/Sept). And competitive crops did not enjoy the price rally... In addition, moderate la Nina planned until Q1 217 should be generally favorable However, crushing capacity will take more time to be extended, especially as the sugar industry did suffer from low price environment in last few years and remains significantly leveraged (Brazil particularly). Which area /country is likely to rise back its production first? EU/India/Thailand/FSU Estimated white sugar cost of production In USD/Ton 1, 8 6 London China Pakistan Brazil Thailand Uttar Pradesh France 1

11 World consumption rebounding but still below Long Term average World consumption has been affected in 15/16 by slowing emerging economies such as Brazil but also was negatively affected by HFCS gaining market share in place like China. While we expect a slight rebound in 16/17 slightly below 1 year average growth, we are not back to full potential. What will be the impact of higher prices in 217? Global consumption per region in Mio tons raw value 2, 3.% East Asia_Oceania 18, Indian Subcontinent 16, 14, 12, 1, 8, 6, 4, 2, 9/1 1/11 11/12 12/13 13/14 14/15 15/16 16/17 2.5% 2.% 1.5% 1.%.5%.% North_Central America EU/Balkans South America North Africa / Med FSU/Central Asia Middle East East Africa / Yemen West Africa Southern Africa 11

12 World stocks to decrease by 11.5 Mio tons across 2 years After having built 31 Mio tons of stocks from 211 till 215, world stocks will decrease by about 11.5 Mio tons across 15/16 and 16/17 Significant part of stocks are not available to the world market. At this stage, 8 Mio tons of stocks are sitting in Chinese reserve stocks World sugar production / consumption balance Oct/Sep year / mio tons raw value World stocks estimate End Sep carry-outs in Mio tons raw value 15, k tons US cts/lb 3 9, 1, 25 8, Rest of the world China reserve stock Indian stocks 5, 2 7, , (5,) (1,) Net Surplus/Deficit NY11 2nd mth 1 5 5, 4, (15,) 3, 12

13 Jan-8 Sep-8 May-9 Jan-1 Sep-1 May-11 Jan-12 Sep-12 May-13 Jan-14 Sep-14 May-15 Jan-16 Sep-16 May-17 Jan-18 Stock/use on a declining trend until end of 217 Drawdown in stock/use is not yet completed and could continue until end of 217. The lows in stock/use are likely to be seen at the end of 217 Until we see a likely 17/18 surplus, the market will be tight but vulnerable to 2 main import demand elements : - The Indian import program, needed or not? - The Chinese stock reserve release Global stock/use evolution Average 12 months Major importers stocks End Sep carry-outs in Mio tons raw value cts/lbs NY 2nd mth World stock/use (Average 12 months) World stock/use excluding chinese Gvt stocks Stock/use 54% 52% 5% 48% 46% 44% 42% 4% 38% 36% 34% 18, 16, 14, 12, 1, 8, 6, 4, 2, China India Indonesia Russia Egypt Iran 13

14 Speculators position reaching new record Speculators are long 17.6 Mio tons of sugar or half of the CS Brazilian crop Nominal value of the position represents 9 Billion USD while funds are currently short 6 billions USD on the Grains & Oils complex Given the huge size of this deployment, market could be highly influenced by macro elements or by turning fundamental data. Is the long deployment not sending the wrong or too early signals to the farmers & the Industry? NY 11-1rst month contract vs. net spec position Oct Sept in Mio tons Lots 4, 3, 2, 1, -1, -2, Net spec positions NY 11 contract 1rst month price Cts/lbs

15 Conclusions World stock/use are on a declining trend until Q4 217 Without weather issues, 17/18 world production should notice a major rebound, especially in EU/India/Thailand At current prices, trade flow S&D are more or less balanced until Sept 217, which should keep market volatile to any change in short term availability. While fundamentals remains tight/supportive until end of 217, the market could be vulnerable to 3 major elements : India import program China stock reserve release Speculative funds positioning THANK YOU! 15