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Sugar and Ethanol Daily Report

By: StoneX Intelligence Brazil, StoneX Intelligence Brazil

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Sugar exports rebound in November
 
Filipi Cardoso
filipi.cardoso@stonex.com
Marcelo Di Bonifacio Filho
marcelo.bonifacio@stonex.com
Rafael Borges
rafael.borges@stonex.com
MDIC releases data for sugar and ethanol exports in November 2023
On Wednesday (06), the Ministry of Development, Industry, Trade and Services (MDIC) released detailed export and import data for the Brazilian trade balance in November. Sugar shipments, as expected, increased monthly, totaling 3.68 million tonnes (the highest monthly figure of 2023), 28.3% above the volume in October, which was only 2.87 MMT - for raw sugar, the monthly hike was 32%.
The improvement in Brazilian sugar exports is directly linked to the lower rainfall in November compared to October at the port of Santos (the main outlet for the commodity), which had been facing logistical difficulties and increased lineups for sugar loading. At the port of São Paulo, sugar shipments reached 2.6 MMT, a monthly growth of 34%. In addition, the crops in the Northeast, with performance above last year so far in the cycle that started in September 2023, have swelled their surplus available for export, providing higher volumes of sugar exports.
Brazilian sugar exports (million tonnes)
image 85553
Source: MDIC. Design: StoneX.

The growth of Brazilian shipments explains part of the recent sugar depreciation in New York, as there were concerns about Brazil's ability to export such a large crop in this 2023/24 season (Apr-Mar) in the Center-South. In October, bullish movements reflected the increase in rainfall in Santos, which dissipated at the turn of the month, reversing the market direction until this first week of December, when the March/24 contract returned to US¢ 23.00/lb, accumulating a drop of 475 points in 10 trading sessions.

On the Brazilian side, optimism regarding shipments is expected to continue, with the expectation that the country will export volumes above average in December, January, February, and March - the inter-crop for sugarcane in the Center-South - as a result of both the delay in exports throughout the year and productive growth. In terms of rainfall, November was already less rainy compared to October, and based on what has been observed and the forecasts so far, December can also be less rainy compared to October. According to data from Williams Shipping Agency, for shipments in December, the sugar lineup stood at 3.8 million tonnes last week - a volume that is not expected to be fully realized by the end of the month but already indicates the large availability of the commodity from Brazil, still impacted by the weak month of October.

Thus, in 2023, StoneX Market Intelligence expects exports at 30.7 million tonnes, slightly above the record registered in 2020. For 2024, investment in logistics, especially in port terminals, will be necessary for the country to be able to export all the sugar that will be available given the increasingly better projections for the 2024/25 crop (Apr-Mar) in the CS - with a potential for national shipments to reach over 35 million tonnes.

As brought up in a recent analysis (here), sugar stocks in Brazil are above 16.0 MMT, a record volume. In the Center-South, shipments are not expected to be able to absorb the entire production hike, resulting in a potential carryout from 2023/24 to 2024/25 of around 6.0 MMT, almost double the 3.33 MMT of 2022/23. In the next season, even if exports increase, the scenario should be similar since maximizing the sugar mix will put more of the product on the market in the face of the natural mismatch of port investments, which take longer to be effective and increase export capacity.
 

Ending stocks of sugar in the Center-South (million tonnes)

image 85554
* StoneX estimates. Source: UNICA. Design: StoneX.

Regarding ethanol trade in November, exports above 200 thousand m³; however, it recorded a monthly contraction of 13.3% compared to the same period in 2022, marking a 20.3% decrease. Year-to-date, ethanol exports total 2.22 million m³, a 4.3% increase compared to last year.

Brazilian monthly ethanol exports (million m³)

image 85556
Source: MDIC. Design: StoneX.

The high number of ethanol exports observed in 2023 can be largely attributed to increased biofuel supply. The Center-South crop has been showing high productivity, crushing, reaching almost 600 million tonnes (as of the first half of November). Additionally, the ethanol-gasoline parity was above 70% in the first half of the year, reducing hydrous ethanol consumption in the domestic market. In contrast, Otto cycle consumption showed significant growth.

According to StoneX estimates released in late November, the total ethanol production for the 2023/24 crop season (April-March), including products produced from corn and sugarcane, is estimated at 32.8 million m³, a 13.5% increase compared to the previous crop season. This factor has kept the plants with high stocks, allowing them to maintain export levels above the 5-year average. 

According to projections, the sector is expected to export about 2.5 million m³ in 2023, a scenario like that of 2022. The main difference lies in the domestic consumption of hydrous ethanol, which has been recovering since August and is expected to maintain consumption at high levels in December. Therefore, with a heated domestic demand, the market is likely to maintain exported volumes above 200 thousand m³ but is not expected to reach the levels of December 2022 when more than 310 thousand m³ were exported.

 

Daily recap
In today's session (06), raw sugar in New York dropped sharply, and March/24 closed at US¢ 23.00/lb, a daily decline of 196 points, or 7.9% - reaching the lowest level since the end of June. The percentage fall was the highest since February 3, 2011, after, the day before, raw sugar reached its highest value in history, at US¢ 35.51/lb.
In addition to the high volumes of Brazilian sugar exports, which had recently brought bearish influence, the commodity received updates from India, which brought arguments for significant selling pressure today. According to rumors, the Indian government could review the ethanol blending target in gasoline in 2024, potentially diverting less sugar for biofuel production - opening the possibility of an exportable surplus of sugar by the country.
Finally, it is important to highlight a common movement of sudden devaluation in other commodity markets, such as Brent (-3.83%), corn (-1.3%), and soybeans (-0.8%), among others, showing a more risk-averse financial environment this Wednesday (06).
INDICATORS
Sources: ICE, CEPEA, B3, ANP, Brazilian Central Bank, California Air Resources Board (CARB), CONSECANA, StoneX. *Estimated. Sources: UNICA & StoneX. Design: StoneX.
 
 
 
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