- We expect Thai mills to crush 120m tonnes cane in 2019/20, down from 131m tonnes this year.
- Sugar production will therefore fall by 1.7m tonnes year-on-year.
- But sugar availability may actually rise as we expect 2m tonnes Thai sugar to be carried from this season into next.
Lower Sugar Production
- We currently estimate 2019/20 sugar production to be 12.9m tonnes vs 14.6m tonnes in 18/19.
- This is driven by our forecast that 120m tonnes of cane will be crushed next year, down from 131m tonnes this season.
- This is largely because farmers in the North and North East of the country may switch some cane acreage to cassava.
- We are also concerned that sucrose yields may be worse year on year if dry weather persists.
Sugar Production
- We think that exportable supply from sugar produced in 2019/20 will be 9.6m tonnes, 2.2m tonnes less than this year’s.
Thai Raws and Whites Availability
- However, with Thailand expected to carry substantial volumes of raws and white sugar into 2020, export availability may actually increase!
Cane Area Impacted by Falling Cane Price
- We expect cane area to reduce by 4% in 2019/20 due to a significant switch to cassava.
Thai Cane Production
- Most of this switch will occur in the North and North East region where the farms sizes are less than 1ha on average.
- This makes farmers extremely sensitive to crop returns, and they can switch crops rapidly.
Cane Area by Region
- Cassava is drought-tolerant and has similar soil requirements to cane.
- Due to falling cane prices, cassava returns are now better than cane returns for farmers.
Thai Cane Price
Thai Farmer’s Returns
Further Weather Risk?
- Our current cane and sugar estimates could be reduced should rains disappoint in 2019.
- Weather has been hot and dry in Q1’19; this is fine because the first quarter of the year is the dry period and is not important for cane development.
- However, the Thai Weather Bureau forecasts below-average rainfall for 2019, and if this comes to pass we would reduce our cane and sucrose yield estimates.
- 85% of Thai cane is un-irrigated and relies solely on rain for moisture.
Thailand Monthly Rainfall
Cumulative Rainfall since 1stJanuary till 27th May