The latest data from the USDA’s first biannual report on Thailand show a strong recovery of the local crop in the new 2020/21 season. In fact, after a 43% decrease in domestic production from the 2018/19 international crop to 2019/20 (from 14.58 to 8.25 million tons), the new season must bring a 56% increase in the volume of sugar that is expected to return to 12.90 million tons. Besides the increase in productivity and crop conditions, beginning stocks must sharply fall, along with a record export volume and still strong domestic demand. Recently, the local government even approved a bailout of just over USD 324 million to help 300,000 cane producers who had previously faced drought problems in their cane fields and a decline in international sugar prices. Thailand has 57 mills with a daily production capacity of just over 983,500 tons of cane, which denotes the tone of application of the stimulus package to the sector, which is largely responsible for recovering the crop, as indicated by USDA. An example of the drought impacts of the previous crop is the loss in the international status of local companies that ranked in second place and now fell to the sixth one.
Looking at the USDA’s report more closely, we have the indication that production is estimated at 12.90 million tons for the 2020/21 season, up 56.36%, or 4.65 million tons, from the volume of 8.25 million tons of the 2019/20 international crop. Domestic demand grew by 4.17% between the 2019/20 and 2020/21 seasons, or 100 thousand tons, with internal consumption going from 2.40 to 2.50 million tons.
As a result, the balance of supply and demand tends to show a surplus of 10.40 million tons, indicating a positive adjustment of 77.78%, or an increase of 4.55 million tons over the surplus of 5.85 million tons seen in the 2019/20 season. In the meantime, final stocks for the 2020/21 season tend to stand at 2.93 million tons, with a decrease of 600 thousand tons between the 2019/20 and 2020/21 crops, indicating a 17.00% decline between the two seasons. This 17.00% decrease in final stocks combined with a 4.14% rise in domestic demand must drive the stock/consumption ratio to 117.20%, down 29.88% from the previous season (147.80%).
Beginning stocks for the 2020/21 season must hit 3.53 million tons, down 57.62% from 8.33 million tons in the season earlier. In absolute terms, the stocks fell by 4.80 million tons. In turn, exports are expected to rise 350 thousand tons during the same period, or 3.29%, going from 10.65 to 11.00 million tons between the 2019/20 and 2020/21 international crops. According to USDA, production should grow by 16.63%, or 4.80 million tons, with supply going from 28.90 to 33.70 million tons.
Still in May, USDA had already pointed out that favorable supply conditions for the country’s reservoirs were the main vector that would boost supply, which, in theory, would encourage more local producers to maintain and expand cane fields. At the end of the third week of June, the Indian Sugar Mills Association (ISMA) indicated that it also expected an increase in the sugar supply of the country for the same reason, because of favorable conditions for cane fields due to the comfortable level of supply in reservoirs. ISMA points to a 12.13% growth, of 3.30 million tons, with the 2019/20 crop supply going from 27.2 to 30.5 million tons for the 2020/21 season, which starts in October this year. ISMA also detailed that the country’s sugarcane area is expected to grow by 8%, data that USDA did not include in its May report.
As for exports, ISMA pointed to 6 to 7 million tons, against 5.2 million in the current 2019/21 crop. USDA points to exports of 5 million tons next crop, stable in relation to the current one. ISMA expects stockpiles to drop from 14.5 to 11.5 million tons, 20.69% lower. USDA indicates that the country’s beginning stocks are expected to decline 9%, from 17.61 to 16.01 million tons, while final stocks would rise by 8.77%, from 16.01 to 17.49 million tons. Coincidence or not, India’s Federation of Cooperative Sugar Factories (NFCSF) also indicated an increase in the country’s production, by 14%, or 4 million tons, from 27.2 to 31.2 million tons. Therefore, it is clear that USDA, ISMA, and NFCSF are seeing a supply scenario between 30 and 31 million tons for India’s 2020/21 season.
Turning to USDA’s report, and looking more closely at the most recent data from May 2020, production is estimated at 33.70 million tons for the 2020/21 season, up 16.63%, or 4.80 million tons, from 28.90 million tons in 2019/20. On the side of domestic demand, we have an increase of 5.56%, or 1.5 million tons, between 2019/20 and 2020/21, with internal consumption increasing from 27.00 to 28.50 million tons.
As a result, the balance of supply and demand tends to show a surplus of 5.20 million tons, indicating an increase of 173.95% (or 3.30 million tons) from the surplus of 1.90 million tons calculated for the 2019/20 season.
In the meantime, the final stocks for the 2020/21 season tend to stand at 17.41 million tons, with an advance of 1.40 million tons between the 2019/20 and 2020/21 crops, indicating an increase of 8.77% between the two seasons. This increase in final stocks must lead the stock/consumption ratio to 61.12%, up 1.81% from the previous crop. The stock/consumption ratio is on the rise in view of the 8.77% increase in stocks, although it received a slightly negative impact due to the 5.56% growth in demand. With this, the index between the capacity to meet the demand on the part of the final stocks of the crop is slightly close to the record level of the last nine crops, which was 63.94% in the 2018/19 season.
Beginning stocks for the 2020/21 season will likely hit 16.01 million tons, down 9.08% from the volume of 17.61 million tons in the previous crop, which means a decrease of 1.60 million tons. Imports for the 2020/21 season must fall by 300 thousand tons, or 20.00%, from 1.50 to 1.20 million tons. In turn, exports must remain stable at 5.00 million tons between the 2019/20 and 2020/21 crops.