Australian Sugar Industry Alliance Forum 30th April 2015 Where are we now? What does the future hold? Some tentative conclusions Brazil is back Government is back The market may have bottomed Excessive stocks Over-capacity Low world prices 5 Why is production so slow in adjusting to price? 7 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. The weather Ratoon cycle Currency movements Mill capacity maximization Protected markets Subsidized cane and beet prices Lack of alternative crops Prices of alternative crops Guaranteed market for cane Guaranteed cane prices 8 9 India: 6 mln mt EU: 5 mln mt Thailand: 6 mln mt Brazil: 4 mln mt Africa: 3 mln mt NAFTA: 3 mln mt ROW: 4 mln mt Total 31 mln mt 11 Prod Cons Ref Cap MENA 4.0 16.2 17.0 India SC 29.0 27.0 6.1 China 13.4 16.0 9.7 Excess refining capacity: 16.0 mln mt 12 13 14 15 16 17 185 mln mtrv World consumption trend 180 175 170 165 160 155 150 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14*14/15* 18 The health issue • Inaccurate Media Reports • Academics Selling Books Dr. Robert Lustig is a pediatric endocrinologist and a leading expert in childhood obesity at the University of California in San Francisco. 1,000 mt Production Consumption Raw exports White exports 2014-15 179,000 179,000 36,500 21,500 2024-25 220,000 220,000 44,600 26,230 Consumption estimated to grow at 2% per annum Production and world trade estimated to grow (on average) at same rate 20 1,000 mtrv 2014/15 2024/25 Brazil India EU China Thailand USA Mexico Pakistan Russia Australia 36,700 27,000 18,800 13,000 11,000 7,600 6,300 5,200 4,800 4,400 43,700 33,000 23,800 13,000 17,000 8,600 8,300 6,500 4,800 5,500 ROW 45,200 55,800 Total 180,000 220,000 21  Brazil  India  Thailand  China  The EU CS Brazil production estimates (Apr/March crop year) Cane crush mln mt 2014/15 2015/16 Final estim. Actual estimates 571.3 136.6 ATR kg/mt cane Sugar mln mt Total Ethanol bln ltr 32.0 26.1 mln mt 43.02% 56.98% 15.0 Sugar Mix Ethanol Mix Cana bisada 585.0 135.5 2015/16* More ethanol More cane 590.0 135.5 2015/16** More ethanol Same cane 585.0 135.5 33.2 26.0 32.76 26.7 32.48 26.5 44.00% 56.00% 10.0 43.00% 57.00% 10.0 43.00% 57.00% 10.0 Once again the marginal supplier to world market Brazil: Hydrous Consumption as Fuel 1.6 bln litres /mth 1.2 0.8 0.4 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2009 2010 2011 2012 2013 2014 2015 Source: ANP FOB CS raw sugar and Hydrous Forward Curves Brazil - Retail Ethanol Price Competitiveness 85% 14.0 USc/lbs FOB CS BRA raws (Apr 23rd) FOB CS BRA raws (Apr 2nd) BM&F Hydrous in sugar equiv. (Apr 23rd) BM&F Hydrous in sugar equiv. (Apr 2nd) 13.7 75% 13.4 70% 65% 13.1 12.8 55% Average Brazil SE Brazil 45% Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 12.5 12.2 Apr.15 Jun.15 Aug.15 Oct.15 Dec.15 India could be the elephant in the room '000 mt 1,200 Daily Thai Cane Crushed '000mt 800 1,000 Thailand monthly raw export 700 600 800 2012 2013 2014 2015 500 600 400 400 300 200 200 100 0 N D J F Minimum - Maximum 2013-2014 M A M 10 years' average 2014-2015 J Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Government support through state banks Shift from rice to cane to boost rural incomes RMB/mt 5300 ZCE futures Prices 5100 4900 Smaller crop 4700 4500 Import restrictions 4300 4100 Domestic subsidies 3900 3700 1st month 2nd month EU-28 SnD (mln MT) Sugar production Sugar consumption HFS consumption Imports Exports Current 15.8 18.0 0.7 3.8 1.6 post 2017 19.0 16.5 2.5 0.5 3.0 Net export likely to range between -1 and 4 mln MT/year Source : Tereos 29 CAP Budget 1990 - 2020 Direct decoupled support allows commodity prices to drop to (world) market levels “Dumping is, in general, a situation of international price discrimination, where the price of a product when sold in the importing country is less than the price of that product in the market of the exporting country” http://www.wto.org/english/tratop_e/adp_e/adp_info_e.htm Brazil is once again the price setter. It is the place to be if you are debt-free Market may bottoming but still depends on macro-environment Government support could lead to a big increase in production and exports from Thailand, India and the EU Reduce costs Counter health concerns Lobby government for support Devalue your currency OK now that we all agree, let’s go back to our desks and discuss why it won’t work! 36