Analyst Insights

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• In the first three reports of this series, we set out a framework for Sustainable Agriculture (SA) in a global environmental context and introduced the concept of Sustainable Intensive Agriculture (SIA), which looks to add an additional component; that of improving yields.
• We’ll now consider the types of schemes and certifications available for SA.
• The series is brought to you by Mark Oulton, former Manager and Trader at Cargill (18 years) and Global Research Manager at SGS (11 years).

• Peru has suffered its driest year in a decade so far in 2020.
• Its cane crop has performed poorly as a result and is 56k tonnes smaller year-on-year.
• This, coupled with the increased demand for ethanol-based sanitation products throughout the pandemic, means many Peruvian mills are producing ethanol to earn more money.

• Perú ha sufrido su año más seco en una década en lo que va de 2020. 
• Su cultivo de caña ha tenido un resultado pobre y es de 56k toneladas menos anualmente. 
• Esto, unido al aumento de la demanda de productos de saneamiento basados en etanol a lo largo de la pandemia, significa que muchas fábricas peruanas están produciendo etanol para ganar más dinero. 

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• Our 2020/21 forecast (Sep/Oct) remains unchanged.
• We think the average price will sit in the range of 3.4 to 3.8 USD/bu.
• The average price, since the start of the crop (Sep/Aug) is running at 3.72 USD/bu. 

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• Specs continued to buy the raw sugar market in the week up to the 13th of October, increasing their net long position to 244k lots.
• This buying was matched by commercials, who increased their already massive gross position, with almost 38m tonnes of raw sugar now hedged on the market.
• Prices have steadily risen since the data was captured, suggesting specs are continuing to buy the market.

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• We think Thailand will produce 7.1m tonnes of sugar in 2021.
• This comes as many farmers switched from planting cane to cassava, in search of greater returns.
• This means sugar production will be the lowest in more than a decade.

• The cane molasses prices have been broadly uncompetitive against corn and wheat prices for the last five years, with the molasses price averaging $169/mt (CIF), compared to CBOT corn and wheat prices of $143/mt and $175/mt.
• Molasses is still an important animal feed ingredient, with approximately 56% of the global molasses imports consumed in the feed sector.
• Traditionally, molasses was a low-value substrate with a useful energy content and pelleting properties.

• Thailand has suffered from drought for the past two years.
• Its cane and sugar production have been poor as a result.
• However, new irrigation systems and improved rainfall have increased water availability, so we think production could rebound in 2021/22.