Czarnikow stood by expectations of a 3.0m-tonne world sugar production surplus in 2022-23, viewing that improved prospects for output in Brazil would be offset by a dryness setback to Thai volumes.

The commodities trader, which had initially forecast at 32.0m tonnes sugar production in Brazil’s key Centre South region, lifted the estimate to 32.5m tonnes, saying the sweetener looked more attractive to mills than ethanol, which they can also make from cane.

Weaker ethanol prices were “causing mills to increase their blend towards sugar”, Czarnikow said.

‘Dropped steeply’

Prices of both hydrous and anhydrous ethanol, weighed by lowered prices for gasoline, “dropped steeply” last month, to their lowest since March-April last year, in top cane-growing state São Paulo, research institute Cepea said separately.

Prices of hydrous ethanol, which is used neat in cars as an alternative to gasoline, fell by 21% month month, according to Cepea data, which show a 17.0% dip in values of anhydrous ethanol, the type which is blended into gasoline.

Sao Paulo prices of crystal sugar fell by a more modest 6.6% over the same period, finding some support from a fall in Indian sugar exports, the institute said.

‘Irregular rains’

For Thailand, Czarnikow cut its sugar production forecast for 2022-23 by 500,000 tonnes to 10.8m tonnes.

While still up 800,000 tonnes year on year, and “a second year of recovery after the heavily drought-affected 2020-21 crop year”, new season prospects had been undermined by fresh dryness concerns.

“Following a recent crop tour of the lower northeast cane areas, farmers have instead reported irregular rains along with a higher level of weeds in the fields,” the trader said.

World production for 2022-23 was forecast at 180.2m tonnes, ahead of consumption pegged at 177.3m tonnes – growth of 2.2m tonnes year on year “in part due to more economies returning to pre-Covid consumption and through an increase in population”.

Under Czarnikow’s forecasts, the world sugar supply and demand balance is poised for a third successive surplus in 2022-23, after surpluses of 6.1m tonnes in 2021-22 and 3.1m tonnes in 2020-21.

ISO forecasts

The report comes days after the International Sugar Organization lifted its forecast for the world production surplus in 2022-23 by 2.80m tonnes to a “substantial” 5.57m tonnes – although caution should be made making comparisons between commentators, given differing methodologies.

The ISO, for instance, uses strictly an October-to-September crop year, while Czarnikow uses a mixture of local crop years. Brazil’s season, for instance, starts in April, but Thailand’s in October.

The intergovernmental organization estimated the 2021-22 sugar balance at a deficit of 1.34m tonnes.

The ISO estimated 2022-23 world production at 181.9m tonnes, “a new record and up substantially” from the 2021-22 figure of 174.1m tonnes.

“World consumption is projected at 176.3m tonnes, rising 0.5%” year on year.

Price outlook

The organization added that its price outlook was “neutral-to-bearish”, as “fundamentals show a surplus in 2022-23, while trade estimates point to excess availability”.

However, negative sentiment “tempered with better freight costs for importers”, rising production costs, and somewhat negative positioning by funds already on the sweetener, limiting the prospects for a further accumulation of short bets.