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Impact of COVID-19 on International Sugar Trade: Analysis of Brazil
Sugarcane is a plant that provides both alcohol and sugar. Cultivation of this plant originally began in Southeastern Asia. Brazil was first introduced to sugarcane five centuries ago, while it was still a colony under Portugal. Its interesting to note that during this time gold and sugarcane held nearly the same values. During the mid 17th century, Brazil grew to become the largest producer of sugar. Though they lost this rank for several decades, they finally reconquered it in 1970. This came after the governments creation of a project known as ProÃlcool or Programa Nacional do Ãlcool – The National Program of Alcohol.
Main Exporters of Sugar
When it comes to sugar exports, there are three countries that consistently top the list. Those are:
- Brazil with 27.1% of total exports worth US$5.2 billion
- Thailand with 15.4% of total exports worth US$3 billion
- India with 9.1% of total exports worth US$1.8 billion
These countries are then followed by France and Guatemala with 5% and 3.6%, respectively, of total sugar exports.
COVID-19s Effects On Sugar Exports
Recently, there have been over 70 ships lined up at the Santos, Brazil port waiting to load sugar for export. Experts said it may take a month to clear this logjam. Buyers from around the world are scrambling to get ahead of any disruptions caused by COVID-19. The global sugar trade is looking to Brazil, as they posted record output numbers. This comes after Thailand and India both suffered from poor harvests. The only problem is Brazil now has over 610,000 cases of COVID-19 which is the second-most cases in the world. The rising number of virus cases has forced three bulk carriers to suspend loading operations, as they were imposed with a 14-day quarantine period at the Santos port. This comes after crew members aboard the ships tested positive for coronavirus.
The virus has complicated sugar trading, with everyone nervous that vessels may not be able to load or berth quickly. Despite the issues, sugar is a hot commodity. To put this in perspective, ships are waiting to load more than 3 million tonnes of sugar, when you compare this to the same time last year, there were ships waiting for only 700,000 tonnes. Volume isnt the only aspect thats up, wait times are too. Current wait times are up to 29 days, last year these times were only four to five days.
The good news for Brazil is that even though the situation is stressful, buyers are not likely to cancel their contracts due to having a hard time finding alternative supplies. Though India could be an alternative supplier, they are facing similar problems at their ports due to COVID-19.
Market Outlook For Sugar
The price for sugar is forecast to fall and reach a decade low of US 10 cents per pound during 2020-21. This decline is due to Brazils increased sugar production and a fall in ethanol production caused by low oil prices. Its thought that sugar demand around the globe from food industries will contract because government lock downs are reducing the consumption of out-of-home foods. This is combined with reduced household incomes leading to fewer retail sales of sugar-containing products.
The prospects for supply and demand during 2020-21 are tied to implemented measures of control from COVID-19 and how fast the economies recover around the world. Its said that a slow return to economic and social activities will only continue to hurt demand and increase the supply. When it comes to supply, government policies in the major sugar-producing countries are expected to hinder a reduction in the worldwide area used to plant sugarcane. Though global production is set to rebound to recent highs during 2020-21, consumption is expected to slowly recover.
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