USDA points to international deficit of 544 thousand tons

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          The USDA’s second biannual report published on November 21 indicates, already in its title, that the international production and stocks of the commodity are going down. Basically, according to USDA, the global output for the 2019/20 crop, which runs from October this year to September next year, must fall by 6 million tons, clearly due to the reduction by 5 million tons in the supply from India, which accounts alone for 83% of the supply decrease. The explanation comes from the signaling of decline in the country’s expected sugarcane planting area.

       Even before last May’s report, SAFRAS & Mercado was expecting a surplus of 5 million tons, which two months ago was cut to the range of 3 to 4 million tons precisely due to the fall in production from India and Brazil. However, while the USDA’s most recent report in November points to a deficit of 544 thousand tons, we must point out there is still the possibility of new upward revisions by USDA in its May 2020 report. This is because we understand that there is no disincentive to lower the supply in India, which has actually raised its domestic subsidies, keeping most of the 35 million local domestic producers still strongly encouraged to maintain their local sugar production.

          Looking more closely, we can see a production of 174.14 million in the 2019/20 crop, down 3.20%, or 5.75 million tons, from the volume of the international 2018/19 crop, which hit 179.89 million tons. Compared to the May report, there is a 3.65% decline, or 6.59 million tons, from the volume estimated at 180.73 million tons up to then. On the domestic demand side, we have a growth of 0.78%, or 1.35 million tons, with the volume going from 173.32 to 174.68 million tons between the 2018/19 and 2019/20 seasons. Compared to the May report, we have a 1.00% decrease, or 1.76 million tons, from the volume estimated up to then of 176.44 million tons. As a result, the balance between supply and demand tends to show a deficit of 544 thousand tons, indicating a decrease of 108.29%, or 7.10 million tons, from the surplus of 6.56 million tons calculated for the 2018/19 season. Compared to the May report, we have a decrease of 112.70%, or 4.82 million tons, from the volume of 4.28 million tons estimated up to then.

          In the meantime, the final stocks of the 2019/20 crop tend to hit 49.58 million tons, falling 5.47 million tons between the 2018/19 and 2019/20 seasons, down 9.94%. Compared to the May report, we have a 3.65% increase, or 1.74 million tons, over the volume of 47.83 million tons estimated up to then. This increase in final stocks compared to last season should lead the stocks/use ratio to the level of 28.38%, down 3.38% from the previous crop level, which had been 31.76%. Compared to the May report, we have a negative adjustment of 1.27% from the ratio of 27.11% up to then. The stocks/use ratio decreased by 3.38% also due to the 3.65% growth in final stocks. As a result, the ratio between the capacity of final stocks to meet demand is approaching the record level of the last nine seasons, which was 30.10% in 2017/18.

          Total exports at the end of the 2019/20 season are expected to hit 55.14 million tons, pointing to a slight growth of 0.53% over last year’s 54.85 million tons, which means a growth of only 292 thousand tons. Compared to the May report, we have a decrease of 4.47%, or 2.57 million tons, from the volume of 57.72 million tons estimated up to then. On the import side, there is also a decrease, but a little sharper than that seen in exports, of 1.83%, or 951 thousand tons, changing from 52.00 to 51.05 million tons. Compared to the May report, we have a decrease of 0.51%, or 260 thousand tons, from the volume of 51.31 million tons estimated up to then.