Thai (Bualuang):Agro&Food-Sugar: Brazil’s south-central drought in the spotlight

  • Consensus forecast—Brazil’s 2021/22 cane and sugar output drop
  • Possible revision of 2021/22 global sugar balance to a slight deficit
  • USDA’s May report—lower 2021/22 stocks despite higher output

With reduced forecasts for Brazil’s lower 2021/22 cane and sugar output by various soft commodities research houses during Apr-May 2021 owing to the persisting drought in the south-central region, we believe that the 2021/22 global sugar price has room for further increases in 2H21 through 2022 in anticipation of a small 2021/22 global sugar deficit projection. We reiterate a global sugar price range of 16-19 cents/lb in 2H21. Our TRADING BUY on KSL stands, premised on the persisting global sugar price uptrend.

Consensus forecast—Brazil’s 2021/22 cane and sugar output drop

In Figure 1, we collected the forecasts for Brazil’s 2021/22 cane and sugar output from 13 sources including USDA, soft commodities research houses, consultancy and sugar traders and derived its 2021/22 mean south-central cane output at 570m (down 5.9% YoY from its 2020/21 output of 605.5m tonnes pegged with UNICA’s latest report on May 16) and its 2021/22 mean sugar output of 35.4m (down 8% YoY from its 2020/21 output of 38.5m tonnes). Brazil’s 2021/22 total mean cane and sugar output were derived at 629m tonnes and 39.4m tonnes, down 4.3% YoY and 6.3% YoY, respectively (against its wide range of 31-37m and 530-585m tonnes for 2021/22 south-central sugar and cane output, respectively). In our view, a range of 560-570m and 35-36m tonnes for 2021/22 south-central cane and sugar output, respectively, is possible, given a serious south-central drought in Oct 2020 through Apr 2021, or the biggest drought in south-central region ever in ten years.  

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