Sugar Prices Climb Amid Drought Woes in Brazil
Weather Changes Boost Market Sentiment
March NY world sugar #11 (SBH25) saw an increase of +0.05 (+0.23%), while December London ICE white sugar #5 (SWZ24) rose by +0.50 (+0.09%) today.
Weather Forecast Influences Supply Outlook
Sugar prices are experiencing a modest rise due to forecasts indicating lower chances of rain in Brazil. Meteorologist Climatempo adjusted the rainfall forecast for Brazil’s Center-South region, the country’s largest sugar-producing area, from widespread to only scattered over the next week.
Production Estimates Show Decline
Support for sugar prices stems from Wilmar International’s recent cut to its 2024/25 Brazil Center-South sugar production estimate, now forecasted at 38.2 MMT-39.5 MMT, down from 38.3 MMT-40.8 MMT in September. This change is attributed to limited rainfall and rising temperatures.
Previous Output Reports Add Pressure
Confirmation of this trend came last Friday when Unica disclosed that sugar production in Brazil’s Center-South for the second half of September fell by -16.2% year-on-year to 2.829 MMT. However, the total production for 2024/25 has experienced a slight increase of +1.5% to 33.154 MMT through September.
Historical Context of Production Fluctuations
On September 26, New York sugar prices surged to a 7-1/2 month high due to drought conditions lowering Brazil’s sugar production expectations. Rabobank also revised its forecast on September 20, reducing Brazil’s 2024/25 sugar production from 40.3 MMT to 39.3 MMT, citing severe dryness as a concern.
Natural Disasters Impact Harvests
These droughts and excessive heat have sparked numerous fires in Brazil, particularly in the main sugar-producing state of São Paulo. According to the sugar cane industry group Orplana, fires have affected approximately 80,000 hectares of sugarcane, with Green Pool Commodity Specialists estimating a potential loss of up to 5 MMT of sugarcane.
Global Competition from India
Conversely, expectations of a significant sugar crop in India due to favorable monsoon rains are bearish for global sugar prices. The Indian Meteorological Department reported that as of September 30, India received 934.8 mm of rain during this monsoon, 7.6% above the four-year average.
Policy Changes in Brazil and India
Support for sugar prices comes from Brazil’s government crop forecasting agency, Conab, which on August 22 reduced its overall 2024/25 Brazil Center-South sugar production estimate to 42 MMT from 42.7 MMT due to drought conditions. Additionally, the Food Ministry of India lifted restrictions on sugar mills producing ethanol starting November 2024/25, possibly extending India’s sugar export constraints.
Export Dynamics and Domestic Supply Management
Since October 2023, India has limited sugar exports to maintain domestic supply levels, allowing only 6.1 MMT of exports during the 2022/23 season, down from a record 11.1 MMT previously. The Indian Sugar and Bio-energy Manufacturers Association (ISM) reported on October 3 an expectation of 2 MMT available for export next season and has urged the government to reconsider current restrictions.
Production Forecasts Signal Challenges Ahead
According to the ISM, India’s sugar production from October 2023 to April 2024 is predicted to drop by -1.6% year-on-year to 31.4 MMT. For the 2024/25 season, a further decrease of -2% to 33.3 MMT is anticipated. September 30 projections placed India’s sugar reserves at 8.4 MMT, compared to a predicted 9.1 MMT earlier in May.
Thailand’s Expected Crop Increases Price Pressure
In a contrasting trend, Thailand’s Office of the Cane and Sugar Board forecasts a notable increase in sugar production for the 2024/25 year, with projections suggesting an +18% rise year-on-year to 10.35 MMT. Thailand stands as the world’s third-largest sugar producer and second-largest exporter.
Global Supply Concerns Remain
Adding to market complexities, the International Sugar Organization (ISO) on August 30 forecast a global sugar deficit of -3.58 MMT for 2024/25, significantly larger than the estimated -200,000 MT for 2023/24. They expect a global production of 179.3 MMT, reflecting a -1.1% decrease from the previous season.
USDA Outlook Reveals Broader Trends
In its bi-annual report dated May 23, the USDA projected that global sugar production would increase by +1.4% year-on-year to a record 186.024 MMT for 2024/25. Meanwhile, global sugar consumption is expected to rise by +0.8% year-on-year to 178.788 MMT, which would further contribute to a decline in global ending stocks by -4.7% year-on-year to a 13-year low of 38.339 MMT.
More Sugar News from Barchart
On the date of publication,
Rich Asplund
did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article are solely for informational purposes. For more information, please view the Barchart Disclosure Policy
here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
