Little relaxation seen in sugar prices in 2022-23
TUCSON, Ariz. – Analysts speaking at the International Sweeteners Symposium held Feb. 28 in Tucson painted a mostly bullish picture for domestic and global sugar prices for the remainder of 2022 and for the 2022 marketing year- 23 which begins on October 1st. Refined sugar price forecasts for 2022-23, which were seriously traded on the sidelines of the symposium, were only moderately lower than current spot prices which are well above levels seen in recent years.
Craig Ruffolo, vice president – commodities specialist, McKeany-Flavell Company Inc., said he expects refined beet prices to be around 36.5¢ a pound for 2022- 23 and refined cane sugar prices at around 46¢ per pound.
Frank Jenkins, president of JSG Commodities, said he expected both types of refined sugar to be “a few cents above”.
Spot refined cane sugar is currently offered at 52¢ per pound fob on the North East Coast and West Coast, up 24% from a year ago, while beet sugar is offered at about 42¢ per pound fob Midwest, up 15%. Current cane sugar prices are close to the level that allows, if not encourages, “high level” imports – imports of world market sugar that are subject to high tariffs designed to discourage imports above trade levels. tariff quotas.
Current prices are high relative to the USDA forecast for 2021-22, closing inventory-to-use ratio of 14.7%. The ratio partly reflects record 2021 beet sugar and total sugar production. The USDA unofficially maintains a ratio between 13.5% and 15.5%, with the lower limit stipulated as the minimum under the agreements. suspending anti-dumping and countervailing duties on sugar from Mexico. To bring the ratio down to 13.5%, the USDA is expected to lower Mexico’s export limit in the March WASDE.
“Prices are completely out of balance from 13.5%,” Mr Jenkins said.
“Is it really relevant? asked Mr. Ruffolo of the stock-to-use ratio.
Despite the high stocks-to-use ratio, supplies of sugar – particularly raw sugar used by some US refiners – have been tight, which has in part encouraged more imports of higher quality sugar. The USDA is currently forecasting peak sugar imports in 2021-22 at 150,000 tons. Mr Jenkins thinks they could reach 250,000 tonnes. As higher tier imports increase, imports from Mexico are typically reduced to keep the ratio closer to 13.5, thus also limiting feedstock imports for US refiners.
Another quirk of today’s market is the 10¢ per pound premium of refined cane sugar over beet sugar. This spread is usually closer to 2¢ per pound.
“The beet industry is doing its job,” Jenkins noted.
He sees part of the problem in the demand for cane sugar when cane supplies are tight.
“If users don’t switch from refined cane to beets, we won’t exit large-scale, high-level imports,” he said.
While U.S. sugar prices are generally little affected by the world sugar market because imports are restricted under the Farm Bill sugar program and suspension agreements with Mexico, price changes Global raw sugar prices are currently having a greater impact due to high US sugar prices and the aforementioned high level imports. World raw sugar prices at 20¢ a pound would add 2¢¢ to U.S. refined sugar prices, Jenkins said.
Analysts predict that world raw sugar prices in New York at the end of 2022 will range from 18.5¢ to over 20¢ per pound. The current price of nearby raw sugar was 17.7¢ per pound on February 28.
“The world has a continued appetite for sugar,” said Vincent O’Rourke, trader and market analyst, C. Czarnikow Sugar, Inc., who offered a generally bullish view of the global sugar market due to the increase in global demand. “One or more origins must step up to produce more sugar to meet demand in the future.”
At the same time, exports could decline in coming years, he said. Global raw sugar prices need to be close to 19¢ a pound to encourage exports from India, the world’s second-largest sugar producer, he said. Additionally, India is increasing its use of sugar to make ethanol to reduce its dependence on oil imports, which will further reduce the sugar available for export.
However, analysts did not expect Russia’s invasion of Ukraine to have a direct impact on global sugar prices. There could be an indirect effect if demand for ethanol increases due to high crude oil prices caused by the war, they said. This could affect the supply and prices of sugar in Brazil as well as corn-based ethanol in the United States. While it is currently more profitable to export sugar than to make ethanol in Brazil, that could change quickly as oil prices continue to rise, O’Rourke said.