On April 16th, the Indian Sugar Mills Association encouraged the market to update the sugar production data for the first half of April, showing a very gradual reduction in the evolution of manufacturing in the margin (compared to the previous half of the month) and even an increase in the annual comparison.
Besides this information, ISMA warned that the lockdown decreed by the government ended up neutralizing a large part of the demand in the country’s domestic market, which was already expected. One of the direct consequences of this movement of relative maintenance of production levels, together with the forced reduction in consumption, tends to be the increase in the stocks of the country. However, this is a relatively recent move, involving March and April, which must result in a partial accounting by USDA, which already prepares the data for its first biannual report for 2020, scheduled for the end of May. Therefore, in our next newsletter there will be a trend of increase in the volume of final stocks in India, as well as an increase in the stocks/consumption ratio.
The detail is that only part of this movement must be accounted for in the May publication, with the trend being reaffirmed and expanded also in the November report, the second of the year. Besides this factor, we also have the projection of a slowdown in exports due to the lack of logistical capacity to transport production from the interior of the country to ports. Although they are not blocked for exports, ports are impacted by the reduction of labor for operations with trains and trucks coming from production units. Therefore, this is a new vector for the growth of domestic stocks that form a scenario of maintenance of production and decline in both domestic and export demand, which will culminate in a new movement of falling international prices in the coming few months.
SAFRAS & Mercado’s expectations for the sugar supply at the end of the 2019/21 season in India (ending in October) remain at 30 million tons. USDA points to 29.3 million, and ISMA to 26.50 million. In turn, the National Federation of Cooperative Sugar Factory indicates a supply of 26.30 million, while the Ministry of Agriculture of India indicates 27.30 million, after spending most of the year indicating a range from 28 to 29 million tons. Dutch Rabobank expects a supply of 28.90 million tons from India, while All India Sugar Trade Association (AISTA) forecasts 27.50 million.
Looking at the most recent data, during the first half of April, India had a production of 1.50 million tons of sugar, down 11.10% from 1.69 million tons produced in the previous fortnight. In the annual comparison, we can observe an increase of 0.87% over 1.49 million tons produced during the same period last year.
Compared with the 3-year average for the same reference period, we can observe an 0.43% growth over the current production volume. The 3-year average itself decreased 25.45% in the margin, from 2.01 to 1.50 million tons. India indicated the shipment of 2.86 million tons of sugar, while 3.75 million are already bought. This volume shows that 62.50% of the country’s subsidized export target are already completed, assuming that this target must be 6 million tons as the government still indicates, but that it is discredited by local agents who point to more realistic volumes of 4 to 5 million.
The 0.87% high in the annual comparison of the first half of April contrasts sharply with the annual low seen in the immediately previous fortnight, as until then the volume produced was 27.26% below the same moment of the previous year. Since the beginning of the year, the average lows in volume in annual terms have fluctuated around 16.98%, while from the perspective of the 3-year average, the lows have generally fluctuated around the level of 10.43%.
This crop to date, India already shows a supply of 24.78 million tons, down 20.51% from 31.17 million tons produced in the accumulated of the crop until the same moment of the previous year. In this context, the volume produced in the first half of April, of 1.50 million tons, was 39.23% below the average production for the current season, which currently fluctuates by 2.47 million tons. The crop’s average production itself decreased by 4.18%, from 2.58 million tons to current 2.47 million tons.