Indian sugar traders take advantage as frost hits Brazil
Brazil sugarcane crop has been damaged due to unusual frost.
Indian sugar traders for the first time have signed sugar export deals 5 months in advance of cargoes due to a likely drop in Brazil's production. This has also triggered sugar buyers to safeguard supplies from the South Asian country in advance. Sugar production in Brazil, the world's largest producer and exporter of sugar, is set to drop and the effect might continue until 2022 - after 3 frost incidents hit crops in the nation's center-south region in June and July 2021. Broker StoneX slashed its forecast for Brazil's center-south (CS) sugar production to 34.6 MM MTS for the present crop, down from a May 2021 projection of 35.7 MM MTS, and 10 percent lower than last season's record volume of 38.4 MM MTS. StoneX also anticipates the total cane squeeze to drop, however, this may be below their expected volume of reduction. They predict the volume to be around 541 MM MTS, set down from its previous outlook of 568 MM MTS. The broker said it would not regime out additional reductions to its forecasts, since the full scope of damages to crops from the three waves of frosts that hit Brazil are still being evaluated. StoneX now foresees the global 2021/22 sugar supply balance turning to a deficit of 1 MM MTS, from an oversupply of 1.7 MM MTS witnessed in May 2021
One sugar trader said that the expected decrease has already raised sugar prices near their highest levels in 3 years and it is triggering buyers to secure supplies in advance from India, the world's second-largest sugar producer. So far, Indian sugar traders have contracted 500,000 MTS of raw sugar for the cargoes in Dec’21 and Jan’22 between $435 and $440 per MTS on a free-on-board (FOB) basis. Rahil Shaikh, managing director of MEIR Commodities India said that sugar mills would begin production after 3-4 months, but sugar traders have traded new season raw sugar for Dec’21-Jan’22 cargoes in advance. Indian sugar traders typically sign contracts 1 or 2 months in advance and only after the government declares the export support for the international deals.