Sugar trends in Latin America - Sucden .Sugar trends in Latin America ... the rebound will be muted

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  • December 2016

    Sugar trends in Latin America

  • 2

    Trends in Key Sugar Countries Of Latin America

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    Sugar trends in Latin America 10 hot spots for the mid-term

    Exporters CS Brazil Which will get priority on the mid-term: sugar or ethanol?

    NE Brazil Will sugar export business get marginalized?

    Guatemala Can strong growth be sustained over the medium term?

    Other Centrals Who will be Guatemala runner-up in the region?

    Colombia How come sugar cane paradise do not grow exports?

    Cuba Will the sector benefit from new diplomacy?

    Argentina Finally a steady and competitive exporter?

    Peru Are exports on the world markets on the horizon?

    Importers Venezuela Where will end the race to the bottom?

    Chile Prepared to move ahead?

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    CS Brazil to produce 39-40 Mt in the mid-term CS Brazil sugar production sensitivity to Cane crushed x Sugar mix

    CS Brazil Which will get priority in the mid-term: sugar or ethanol?

    Up despite everything: CS Brazil went through hardship during a period of low prices, mills were closed and investments stopped. Still, cane crushed posted a new record last year, discarding talks of flagging cane supply or shrinking industrial capacity.

    Whats up in 2016/17: Cane crushed will be below last year due to peculiar weather conditions but sugar output should still be up by a whopping 4 M to 35.2 Mt.

    Outlook?: There will not be a significant number of new mills before long; and older cane needing renovation could trigger a hiccup in cane supply next year or the one after. That said, cane supply and industrial capacity are still on an upward trend on th emid-term, and the sugar mix should increase as long as sugar prices remain appreciably above the ethanol parity.

    As long as sugar prices remain above USc20/lb Projected ethanol parity based on Crude oil, BRL (current taxes)

    ATR: 135,0

    40% 41% 42% 43% 44% 45% 46% 47% 48% 49% 50%

    620 31,9 32,7 33,5 34,3 35,1 35,9 36,7 37,5 38,3 39,1 39,9

    625 32,2 33,0 33,8 34,6 35,4 36,2 37,0 37,8 38,6 39,4 40,2

    630 32,4 33,2 34,0 34,8 35,7 36,5 37,3 38,1 38,9 39,7 40,5

    635 32,7 33,5 34,3 35,1 35,9 36,8 37,6 38,4 39,2 40,0 40,8

    640 32,9 33,8 34,6 35,4 36,2 37,0 37,9 38,7 39,5 40,3 41,2

    645 33,2 34,0 34,8 35,7 36,5 37,3 38,2 39,0 39,8 40,7 41,5

    650 33,4 34,3 35,1 36,0 36,8 37,6 38,5 39,3 40,1 41,0 41,8

    655 33,7 34,5 35,4 36,2 37,1 37,9 38,8 39,6 40,4 41,3 42,1

    660 34,0 34,8 35,7 36,5 37,4 38,2 39,1 39,9 40,8 41,6 42,4

    sugar mix

    can

    e cr

    ush

    ed

    USD/BRL 3,50

    Crude oil WTI $/b 60

    US gasoline NYH Fob $/gal 1,89

    Brazil gasoline A Santos Cif $/m3 522

    Brazil gasoline A ex-refinery r$/m3 2392

    Brazil gasoline C ex-pump r$/l 4,16

    Brazil ethanol ex-pump r$/l 2,91

    ex-mill r$/l 2,08

    Ethanol parity NY#11 equivalent Usc/lb 18,1

    Sugar prices (max mix) NY#11 equivalent Usc/lb 19,6

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    Sugar mix decreasing as cane losses focus in AL and PE NE Brazil cane crushed and sugar mix

    NE Brazil Will sugar export business get marginalized?

    Sharp decline: Sugar output has decreased significantly since 2010/11 as low prices hit harder than in the south. Production losses focused in the 2 sugar export-oriented states of Alagoas and Pernambuco whereas other states , being both domestic sugar and ethanol-oriented, increased production.

    Modernization underway: Some producers in Alagoas and Pernambuco managed to keep their financials afloat and are undertaking modernization investments: irrigation, more focus on productive land

    Outlook?: North Brazil is unlikely to rebound fully to its previous peak. However, increased agricultural yields should compensate area decline, and production and exports could recover partially. For 2016/17, the rebound will be muted by unfavorable rain. Sugar output is expected around 3.0 Mt and possibly 3.2 Mt in 2017/18.

    Sugar production/exports sharp decline since 2010/11 NE Brazil sugar production and exports

    44%

    46%

    48%

    50%

    52%

    54%

    56%

    58%

    60%

    62%

    40

    43

    46

    49

    52

    55

    58

    61

    64

    67

    03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15 15/16 16/17

    Mt Cane crushed Sugar mix

    1,0

    1,5

    2,0

    2,5

    3,0

    3,5

    4,0

    4,5

    5,0

    03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15 15/16 16/17

    Mt Sugar production Sugar exports

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    Impressive 25-year growth taking a break Guatemala sugar production

    Guatemala Can strong growth be sustained over the medium-term?

    Impressive growth for the past 25 years: Sugar production increased three fold over the past 25 years thanks to investments in industrial capacity, area expansion, and improved agricultural yields.

    Growth takes a break: However, investments slow down recently, area ceased to expand and, combined with detrimental weather, production was lower in 2015/16. It is expected around 2.9 Mt in 2016/17, still below the record of 2 years ago.

    Outlook?: planted area may not grow much in the near term, but agricultural yields still have potential to grow more thanks to irrigation and research. Being a competitive producer, Guatemalan production should resume growing, although at a lower pace than before.

    .As sugar cane area stabilize Guatemala harvested area

    0,0

    0,5

    1,0

    1,5

    2,0

    2,5

    3,0

    90/91 92/93 94/95 96/97 98/99 00/01 02/03 04/05 06/07 08/09 10/11 12/13 14/15 16/17

    Mt

    0

    50

    100

    150

    200

    250

    300

    90/91 92/93 94/95 96/97 98/99 00/01 02/03 04/05 06/07 08/09 10/11 12/13 14/15 16/17

    1,000ha

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    El Salvador & Nicaragua biggest producers after Guatemala Sugar production in Central America (except Guatemala)

    Other Centrals Who will be Guatemalas runner-up in the region?

    Export-oriented: The other countries of Central America all produce and export sugar for a total of 1.5 Mt. Among them, El Salvador and Nicaragua are the biggest and total 1.0 Mt in exports.

    El Salvador vs Nicaragua: El Salvador has so far managed to keep its rank as 2nd biggest producer/exporter. Nicaragua is however closing the gap. Benefiting from a more concentrated industry and more irrigation capabilities, Nicaragua could continue to catch-up. Nicaraguas industry is also somewhat supported by exchange rate fluctuations as the Cordoba weakened the most in the region.

    Outlook?: Similarly to Guatemala, production and exports should continue to grow in the other countries of Central America, although at a slower pace than before in the near-term.

    Nicaraguas Cordoba weakened by 10% since early 2016 Reginal exchange rates (base 100 in April 2015)

    200

    300

    400

    500

    600

    700

    800

    900

    09/10 10/11 11/12 12/13 13/14 14/15 15/16 16/17

    kt El Salvador

    Nicaragua

    Honduras

    Costa Rica

    96

    98

    100

    102

    104

    106

    108

    110

    112

    04-15 06-15 08-15 10-15 12-15 02-16 04-16 06-16 08-16

    GuatemalaEl SalvadorNicaraguaCosta RicaHonduras

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    Ethanol growsto the expense of sugar Colombias sugar supply/demand vs ethanol production

    Colombia How come sugar cane paradise do not grow exports?

    Cane paradise: Colombia enjoys ideal conditions for growing cane and is one of the major producer and exporter of the region.

    Declining sugar exports: Yet, sugar output is stagnant and export declines Priority for ethanol: This is due to competition from ethanol where investments focus. Ethanol mandates

    is gradually increased and competition is not expected to abate. Outlook?: Sugar exports could decrease further. Affected destinations? Peru in case it gets self-sufficient

    and/or destinations outside the Americas (Africa and possibly EU quota?)

    ProductionDomestic

    market

    Exports

    (net)

    Production

    (m3)

    Production

    (sugar-equivalent)

    2004 2 615 1 474 1 156 0 0

    2015 2 355 1 710 663 456 755

    Change -260 236 -493 456 755

    Sugar Ethanol

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    Timid recovery so farbut bright prospects thanks to new diplomacy? Cubas sugar production and exports

    Cuba Will the sugar sector benefit from new diplomacy?

    The demise of a dinosaur: In a long-forgotten past, Cuba used to be the worlds biggest exporter, producing over 8 Mt and exporting more than 7 Mt. The sector dwindled in the 1990s after the collapse of the Soviet Union and reached a bottom in 2010/11 with a crop of 1.2 Mt and exports limited to 0.6 Mt.

    Timid recovery so far: Production has recovered since then. For 2016/17, at least 1.9 Mt production and 1.1 Mt exports are expected.

    Outlook?: New diplomacy should mean renewed investments, possibly from foreign investors. Production could reach 2.5 Mt in the short-term and exports 1.8 Mt. New destinations? Will the Americas open up to Cuban origin? Otherwise Middle-East and Asia.

    0

    1

    2

    3

    4

    5

    6

    7

    8

    9

    80/81 82/83 84/85 86/87 88/89 90/91 92/93 94/95 96/97 98/99 00/01 02/03 04/05 06/07 08/09 10/11 12/13 14/15 16/17

    Mt Production Exports

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    Argentina growing exports Argentina SnD [May/Apr, tel quel]

    Argentina Finally a steady and competitive exporter?

    Political bonanza: The landscape for sugar exports dramatically improved since President Macri took office. Currency controls were remo