What explains the large sugar export volume in 2020?

The year 2020 was marked by a large volume of sugar exports. Although this is an interesting fact for professionals in the area, it is important to know what the reasons behind it were. Thus, the impacts caused in the sector are clearer, which allows the correct alignment of future strategies.

To better understand this scenario, we interviewed two experts: Matheus Costa, market intelligence analyst in Sugar and Ethanol at Stonex, and Emanuel Andrade, shipping agent and commercial executive. They brought information that clarifies the situation and solved some doubts.

So, if you want to find out about industry trends, be sure to check out this article!

How was the export of sugar in the beginning of 2020?

While the first four months of 2019 resulted in the shipment of 4.5 million tons of raw and refined sugar, 2020 surprised. This year’s data show that the figure reached 5.85 million in the initial four months – and promises an 18.5% increase in the 2020/21 harvest.

Conab, Companhia Nacional de Abastecimento, blames some factors for the expected total of 35.3 million tons. Among them, it is possible to mention:

• drop-in global activities related to the sector.
• devalued real against the dollar.
• expanded production.
• advance sales etc.

But do the experts agree with these notes? According to Costa, it is necessary to think about the combination of all factors and the direct impacts they have caused on the volume of exports. Check out.

Why was there such an increase?

Both Costa and Andrade believe that the points cited by Conab relate, in fact, to a greater maritime export of sugar. They deepened each topic, bringing interesting perspectives and capable of optimizing the sector’s preparation for the coming months.

Reduced production

Major players went through situations that reduced their activities. With this, Brazil managed to expand its space in the market. The main highlight was Thailand, which recorded a strong crop failure, which should weigh on its international sales. Another example in this regard is Mexico: the country had a smaller crop compared to initial expectations. Thus, it ended up not supplying international partners, such as the USA – an important name in the purchase of sugar.

Costa explains the situation in a timely manner: “The countries that started harvesting in October had a significant retraction in the productivity of raw materials. This ended up putting pressure on the exportable surplus”.

Climate conditions

One of the main reasons behind the reduction in the productivity of global producers was the climate. Thailand is an example of this reality. Due to one of the greatest droughts in recent years, its cane fields were impacted and resulted in a volume below that observed in previous harvests.

The professional says: “At that moment, we supply poles that used to be served by Thailand. India is also fulfilling this role”. However, even gaining space in the sector, Costa says that the Indians are not enough to provide significant competition. “The volume of Brazilian exports is much higher. Today, Brazil is the main source for trading with international buyers”, he adds.

Attractive sugar prices on the international market

The points cited, such as climate effects and lower than expected production, presented the foreign market with an attractive price for negotiation by Brazilian producers. In addition to the devalued real against the dollar, the flexibility of the plants in the Center-South expanded the sugar mix, allowing companies to expand their production in a scenario of deficit in the global market.

Domestic sales of ethanol

With the problems faced by the ethanol industry, such as the loss of competitiveness, sugar production was maximized. Costa explains: “Prices even retreated a little with the largest Brazilian offer. However, despite the drop, the high Brazilian exchange rate limited the effects on quotations in R$/t (real/ton)”.

Andrade also talks about the topic. For him, with the international fuel crisis compounded by the pandemic, ethanol prices were influenced downwards. “This favored the choice of sugar in the mills’ production mix, driven by crop failure among competing countries,” he adds.

Pandemic

According to Andrade, the influence of the coronavirus has a visible impact on the volume of sugar exports. “Many experts in the sugar and alcohol market claim that it was a ‘perfect storm’ phenomenon for Brazilian sugar,” he says.

Although some effects are inevitable, not all areas were affected, which also maximized Brazilian production. “Regarding the origination of sugar and the flow to the ports, no significant impacts were noticed due to the pandemic. In addition, shipments have remained intense and regular”, he comments.

What to expect from sugar exports in the coming months?

Understanding what the future expectations are is essential for professionals to consider strategies for maintaining high numbers. According to Emanuel Andrade, the country is already a highlight in sugar from cane. However, it is necessary to consider the variations of the international market to remain so.

Future highlights

It is interesting to keep in mind that sugarcane is not the only raw material available in the production of sugar. Sugar beet also stands out and should become a focus in Brazil. Other factors – offers from competing countries, climatic improvements in hubs and changes in the availability of beet sugar, for example – were cited as focus of attention for stability, along with the various uses of cane.

“A positive fact for Brazil, in addition to the low costs, is the versatility of this product. It has multiple applications in addition to sugar itself and ethanol, such as the composition of bagasse in pellets, bringing new sources of sustainable energy”, concludes the shipping agent.

Possible partners

Matheus Costa, in turn, calls for attention to China and the European Union in the search for better results. While the first is a country that returned to buying significant volumes from Brazil soon, considering that its domestic activities do not meet the demands, the second stands out for the possibility of damage to beet production, given unfavorable weather conditions and pest infestation. Again, the Brazilian product could prove interesting to European buyers.

Sugar exports increased in 2020 and tend to remain high in 2021. For this, it is interesting to keep up to date on changes in the global and national markets, focus on potential new partners and monitor the area’s import and export relations. Good results can come from these attitudes. Thus, “in the 2021 harvest, Brazil should continue with a strongly sugar mix, although the share may be lower than what has been observed in 2020”, concludes Costa.

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