- Thailand will produce a record amount of sugar this season, exceeding last year’s output.
- Raw sugar availability in 2019 will also be a record and will outstrip regional demand.
- We still think 1m tonnes could be carried into 2020, with a further 800k tonnes seeking a home in 2019.
Songkran Crush Update
- It’s Songkran, and at this time Thai cane crushing normally draws to a close.
Thailand Daily Crushing Pace
- Cane crushing in Thailand has been tailing off, with all 5 mills in the East of the country already closed.
- However, mills in the North-East cane area are likely to resume crushing after Songkran and may continue into May.
North-East Crushing Pace
- We think Thai cane crushing will fall a little short of last year’s 135m tonnes, perhaps only reaching 131m tonnes.
- However, sucrose yields this year have been the best we have ever seen
Fresh vs Burnt Cane Percentage by Year
- This is largely due to government incentives given to farmers to harvest fresh and not burnt cane.
- We therefore think sugar production will sneak past last year’s 14.7m tonnes.
Raws In Surplus
- As we’ve highlighted previously, this year’s production has been allocated heavily to raw sugar.
- Thai raws availability this season will be by far a record, at 7.6m tonnes.
Thai Raws Availability
- This far exceeds our estimate for regional raws demand, meaning we think there is a Thai raws surplus of 1.8m tonnes in 2019.
- We expect the industry to carry up to 1m tonnes raw sugar into 2020, when there could be a smaller cane crop owing to improved cassava returns.
- This leaves a further 800k tonnes excess raw sugarwhich will need to be sold to destination or delivered into the No.11 futures market.
Far East Supply / Demand Breakdown
- At current physical values, Thai sugars are cheaper than any other origin for East Asian raws buyers, as well as places such as Bangladesh.
- However, many raw sugar buyers have a preference for Brazilian VHP, which will need to be overcome.
- Current white premium levels are unattractive for mills so we are unlikely to see a further increase in allocation of raw sugar for remelting into refined.
- We will continue to monitor Thai offtake, but we think the scale of this year’s crush is negative for the N/V and V/H spread outlook.