Sugar Prices Dip Amid Rain Forecasts and Production Estimates
Weather Patterns and Industry Reports Shape Sugar Market Outlook
March NY world sugar #11 (SBH25) is down -0.12 (-0.55%), while December London ICE white sugar #5 (SWZ24) has decreased by -2.60 (-0.46%).
Today marks the second consecutive day of falling sugar prices, with NY sugar reaching a one-month low. The anticipated heavy rains in Brazil’s Center-South region are easing previous drought worries, which has led to the drop in prices. Meteorologist Climatempo reported that significant rainfall is expected in Brazil starting Friday, which will help lower temperatures and enhance soil moisture. This area is Brazil’s largest producer of sugar.
However, price declines are somewhat tempered following Datagro’s announcement on Monday. The company revised its 2024/25 sugar production estimate for Brazil’s Center-South down to 38.7 million metric tons (MMT) from the previous estimate of 39.3 MMT, due to ongoing drought and limited milling capacity.
Earlier this month, on October 11, Unica reported a 16.2% year-over-year reduction in sugar output for the second half of September, which fell to 2.829 MMT. In contrast, the cumulative sugar output for Brazil’s Center-South through September is up by 1.5% at 33.154 MMT.
On September 26, NY sugar saw a significant rally, hitting a 7-3/4 month high due to decreased production expectations from drought conditions. Rabobank had downgraded its 2024/25 Brazil sugar production forecast from 40.3 MMT to 39.3 MMT as of September 20, highlighting ongoing issues with dryness.
This drought, coupled with intense heat, has resulted in destructive fires in Brazil, particularly in São Paulo, the country’s primary sugar-producing state. According to sugar cane industry group Orplana, around 2,000 fire outbreaks have impacted approximately 80,000 hectares of sugarcane. Estimates suggest that as much as 5 MMT of sugarcane may have been destroyed by these fires. In a related move, Conab, Brazil’s government crop forecasting agency, reduced its overall 2024/25 sugar production forecast on August 22 from 42.7 MMT to 42 MMT, citing lower sugarcane yields attributed to both drought and heat.
In India, optimism for a robust sugar crop due to above-average monsoon rains is contributing further downward pressure on sugar prices. The Indian Meteorological Department noted that as of September 30, India received 934.8 mm of rain during the ongoing monsoon season, the highest level in four years and 7.6% above the long-term average of 868.6 mm.
In a related development, India’s Food Ministry lifted restrictions on sugar mills producing ethanol for the 2024/25 year, effective this November. This move may extend the country’s sugar export limitations. Last December, India mandated sugar mills to halt the use of sugarcane for ethanol production to bolster its sugar reserves. Since October 2023, India has implemented sugar export restrictions to ensure domestic supply stability, allowing only 6.1 MMT of sugar exports during the 2022/23 season compared to a record 11.1 MMT the preceding year. However, on October 3, the Indian Sugar and Bio-energy Manufacturers Association (ISM) announced that India is projected to have 2 MMT of sugar available for export in the next season and requested the government reconsider existing restrictions.
The ISM reported on May 13 that India’s sugar production from October to April fell by 1.6% year-on-year to 31.4 MMT. Additionally, on September 26, the ISM forecasted a 2% decrease in India’s sugar production for 2024/25, projecting it at 33.3 MMT. The ISM also noted that India’s sugar reserves would stand at 8.4 MMT as of September 30, which is a decline from the previously anticipated 9.1 MMT.
Recent forecasts for sugar production in Thailand are also unfavorable for sugar prices. Thailand’s Office of the Cane and Sugar Board has projected that the country will see a production increase of 18% year-on-year, reaching 10.35 MMT for the 2024/25 season. For context, Thailand produced 8.77 MMT of sugar in the previous season that concluded in April. As the world’s third-largest sugar producer and the second-largest exporter, Thailand’s output significantly influences global sugar prices.
While production estimates are mixed, the International Sugar Organization (ISO) has indicated a bearish outlook for sugar prices. On August 30, the ISO forecasted a global sugar deficit of 3.58 MMT for 2024/25, significantly larger than the 200,000 MT deficit estimated for the 2023/24 period. They projected 2024/25 global sugar production to reach 179.3 MMT, reflecting a 1.1% year-on-year decrease from 181.3 MMT in 2023/24.
Meanwhile, the USDA’s bi-annual report released on May 23 estimated that global sugar production would increase by 1.4% year-on-year to a record 186.024 MMT for 2024/25. Coupled with a projected 0.8% increase in global human sugar consumption, which is expected to hit a new high of 178.788 MMT, the USDA foresees global sugar ending stocks dropping by 4.7% on a year-on-year basis to a 13-year low of 38.339 MMT.
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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 is solely for informational purposes. For more information please view the Barchart Disclosure Policy
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