Porto Alegre, May 21th, 2024 – The most recent data released by the United States Department of Agriculture (USDA) on Thailand show a scenario of sharply improved production, moderate growth in domestic demand, a decline in exports, and the country’s ending and beginning stocks. Basically, the market looks very closely at domestic production and exports and, secondly, at stocks.
Looking at production, we see that in the USDA preview we have a significant increase of 16.43% in the volume of supply (with an increase of 1.445 mln tons) of the new 2024/25 crop, which starts in October this year, compared to the current crop, 2023/24, going from 8.795 to 10.240 mln tons.
According to USDA, this is due to the increase in the cane harvest area, which is expected to grow from 1.470 to 1.565 mln hectares (+6.46%), while the acreage is expected to remain stable at 1.655 mln hectares. The result should be an increase in the cane harvest by 13.12%, from 84.780 to 95.900 mln tons from the 2023/24 to the 2024/25 season. USDA made several updates to the data from the two previous crops besides the indication for the new crop. In the current 2023/24 crop, the volume of cane production was cut by 13.75% from 98.30 to 84.780 mln tons.
In the previous crop, 2022/23, USDA made another cut by 0.11%, going from 96,800 to 96,690 mln tons. The advance in the cane harvest area is due both to the above-average rainfall seen over the last few months and the higher prices paid to producers, which encourages the cane harvest. Thailand’s meteorological department reported that the average rainfall between January and April this year was 25% higher than in the same period last year in the north of the country and more than double in the northeast, which respectively account for 24% and 44% of Thailand’s harvest area.
In terms of minimum prices paid to cane producers, the government has promoted increases in producers’ remuneration, which, in the first quarter of the year alone, already represents an annual increase of 28%. This explains the 16.43% increase in sugar production expected for the new 2024/25 crop, which would grow by 1.44 mln tons. Furthermore, regarding the current 2023/24 crop, USDA ended up cutting the sugar production estimate by 6.44%, or -605 thousand tons, with volumes falling from 9.40 to 8.795 mln tons. Therefore, regarding the current 2023/24 crop, it is important to realize that Thailand has a lower availability of sugar, which will only be recovered in the new 2024/25 crop, which begins in October this year.
Furthermore, SAFRAS & Mercado warns that, besides the prices paid to producers being higher and besides the above-average rainfall in January and April this year, Thailand should benefit from the 2024 monsoon rain season, which, this year, should have above-average volumes due to the overlap with La Niña. Despite this, most international meteorological organizations still do not indicate volumes for this year’s rainy season.
On the export side, USDA points out a significant decline in the country’s future 2024/25 crop due to the current 2023/24 crop of 1.00 mln tons, or 10%, which is quite significant, even more so in a season whose production must increase by 1.44 mln tons, or 16%. According to USDA, the decline in exports will occur due to the growth in domestic prices paid to producers (USD 38.90 a ton), which, for the 2023/24 crop, rose 19% over the previous crop (USD 32.82 a ton), which encourages the maintenance of sugar within the domestic market. Furthermore, in October 2023 the government placed sugar on a list of products with restrictions on exports, which also limits shipments of the commodity.
To top it off, exports are also lower due to the country’s reduced stocks, with initial stocks of 5.32 mln tons for the new 2024/25 crop expected to be 46% lower than the 10.03 mln tons from the previous season, with a YoY decline of 4.70 mln tons. The situation does not change at the end of the crop, with final stocks expected to fall by 45%, or 2.41 mln tons, from 5.32 to 2.91 mln tons.
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