Source: ISMA. Design: StoneX.
Up to now, some 4.7 million tonnes have been exported by India, a volume that is expected to rise to 5.5 million tonnes by the end of the current month. In terms of ethanol, about 86% of production was from sugarcane juice or molasses B, raw materials that completely and partially remove sugar from the production process. Therefore, our expectation is that 3.0 million tonnes of sugar will be directed to ethanol production at the end of the current crop.
While the productive perspectives are clearer in India, it is important to analyze the progress of the crop in other players. In Mexico, 30.7 million tonnes of cane were processed since the beginning of October 2021 until the first week of March, a volume that is 1.9% lower than Conadesuca estimates for the period, in addition to indicating an annual drop of 1.7%.
This performance is the result of excessive moisture in some of the fields, which has pressured the pace of field work. So much so that the current crop’s harvested area has reached 404,600 hectares, a level that represents a 6.4% drop from last crop and 6.8% from official projections. Agricultural productivity, on the other hand, is moving towards being 3.8 tonnes/ha higher than initial estimates, standing at 75.98 tonnes/ha.
As a result, the country’s sugar supply reaches 3.3 million tonnes, 0.9% lower than in the 2020/21 crop. Of the total produced, about 810,800 tonnes have already been exported by Mexico, and the country is expected to direct 2.4 million tonnes abroad by September 2022.
As usual, much of this volume should be directed to the US, especially given the USDA estimate that the stocks/use ratio in the country stands at 13.6% for 2021/22, which is 0.3 percentage points below that observed in the previous crop. Of the total to be acquired from the international market by the US, about 34.5% should come from Mexico.
For the time being, we have maintained our projection that Mexican supply will have a 6.9% annual increase in 2021/22, being estimated at 6.1 million tonnes, although this prospect depends on the coming weeks’ weather. According to a StoneX weather monitoring, rainfall should remain regular for the next 14 days in Mexico’s main sugarcane areas, which could further pressure the harvest pace. If the current difference in relation to official estimates remains until the end of the season, sugar production in the country could close the cycle at 6.0 million tonnes.
On a long-term horizon, attractive commodity prices can still support the country’s sugarcane area. On Thursday, the #11 May/22 contract ended the ICE/NY session at 18.69 c/lb (up 0.7% on the day), a move that followed the dollar index decline and the Brent oil rally, amid reduced optimism about an agreement between Russia and Ukraine.
