Equity Analysis /
Thailand

Khon Kaen Sugar Industry PCL: Thailand: Agro & Food - Sugar: Global sugar stocks drop further in 2022/23

  • USDA’s May report—a slight rise foreseen in 2022/23 production …

  • … but lower global sugar stocks and sugar surplus in 2022/23

  • Latest UNICA report—a downside to USDA’s Brazil production

Prasit Sujiravorakul
Prasit Sujiravorakul

Equity Research Analyst

Bualuang Securities
6 June 2022

We regard USDA’s May report as positive for a further slide in 2022/23 global sugar stocks, fueled by global sugar consumption growth exceeding its production growth. Brazil’s YTD bigger shift to ethanol production caused by the sustained high oil price will represent a downside to USDA’s Brazilian 2022/23 sugar production forecast. Overall, we remain positive on sugar fundamentals and expect a sustained high global sugar price of 18.5-20.5 cents/lb in 2H22. Our TRADING BUY call on KSL stands.

USDA’s May report—a slight rise foreseen in 2022/23 production …

In its May 26 semi-annual Sugar: World Markets and Trade report, USDA released its forecast for 2022/23 for the first time. It projected that the 2022/23 global sugar output would rise 0.9% YoY (to 182.9m tonnes in 2022/23), led by gains in Brazil, Thailand, China, Russia and Australia, outweighing declines in India, Ukraine, Europe, US and Mexico. Brazil’s 2022/23 sugar output should rise 3% YoY, led by higher cane yields due to favorable weather with plentiful rainfall starting Oct 2021 (against its below-average rainfall in 2020 through Jan-Sep 2021 and the severe frosts in late Jun-Jul 2021) with the assumption of the same mix of ethanol to sugar production at 55:45 in 2022/23.