Sugar Prices Surge Amid Growing Concerns Over Global Supply

March NY world sugar #11 (SBH25) closed up +0.61 (+2.81%) on Wednesday, while December London ICE white sugar #5 (SWZ24) also saw gains, closing up +9.90 (+1.76%).

Supply Risks in Brazil Raise Alarm

Sugar prices experienced a boost on Wednesday thanks to a warning from Wilmar International, one of the largest sugar traders globally. The company highlighted a significant risk of a Brazilian sugar shortage in the first half of 2025. This concern stems from low stock levels and a delayed start to the 2025-2026 growing season, primarily due to drought conditions affecting sugar cane development.

Weather Effects and Production Estimates

Earlier in the week, sugar prices dipped as forecasts predicted ample rainfall in Brazil’s Center-South region, expected from Friday onwards. According to meteorologist Climatempo, this rain would help reduce drought impacts by improving soil moisture levels in the nation’s key sugar-producing area.

Support for sugar prices arose from a report by Unica, which indicated a -16.2% year-over-year decline in sugar output in Brazil’s Center-South during the latter half of September, totaling 2.829 million metric tons (MMT). Interestingly, cumulative sugar output for the 2024/25 season registered a +1.5% increase through September, reaching 33.154 MMT.

Fires and Lower Production Projections

In addition to drought concerns, excessive heat contributed to fires in Brazil’s top sugar-producing state, São Paulo. The sugar cane industry group Orplana reported that about 2,000 fire outbreaks affected up to 80,000 hectares of sugarcane. Green Pool Commodity Specialists estimated that fire damage could amount to as much as 5 MMT of lost sugar cane.

Brazil’s government crop forecasting agency, Conab, revised its 2024/25 sugar production estimate down to 42 MMT, slightly below the prior forecast of 42.7 MMT. Similarly, Rabobank lowered its estimate from 40.3 MMT to 39.3 MMT, attributing this drop to ongoing dryness. Moreover, Datagro, on Monday, reduced its Center-South sugar production estimate to 38.7 MMT from 39.3 MMT, again citing adverse weather conditions and mill capacity issues.

Optimism in India’s Sugar Production

On a different note, optimism regarding India’s sugar crop may put downward pressure on global sugar prices. The Indian Meteorological Department noted that India recorded 934.8 mm of rainfall during the current monsoon season—an amount not seen in four years and 7.6% above the long-term average.

India’s Food Ministry has also extended the lifting of restrictions on ethanol production from sugar mills for the upcoming 2024/25 year, likely prolonging export curbs. The government previously halted the use of sugarcane for ethanol production to bolster reserves. Exports were limited to only 6.1 MMT during the 2022/23 season, a drastic decrease from the record-high 11.1 MMT the prior year.

In early October, the Indian Sugar and Bio-energy Manufacturers Association (ISM) revealed that India would have 2 MMT of sugar available for export next season, urging the government to reconsider its current export limitations.

Projected Declines in India’s Production

Despite these hopeful projections for yields, the ISM reported a -1.6% decrease in India’s 2023/24 sugar production, totaling 31.4 MMT. They also anticipated a -2% year-over-year decline for 2024/25, dropping to 33.3 MMT, with reserve levels lower than expected at 8.4 MMT.

Thailand’s Growing Sugar Production

In another development, Thailand’s Office of the Cane and Sugar Board projected a robust +18% annual increase in sugar production for 2024/25, forecasting output of 10.35 MMT. This is a rise from 8.77 MMT produced in the past season, positioning Thailand as the world’s third largest sugar producer and the second largest exporter.

Global Supply Projections and Future Trends

Support for sugar prices may come from the International Sugar Organization’s (ISO) forecasted global sugar deficit of -3.58 MMT for 2024/25, a significant rise from the estimated -200,000 MT shortfall for 2023/24. The ISO anticipates global sugar production dropping -1.1% year-over-year to 179.3 MMT for 2024/25.

The USDA’s bi-annual report projected a +1.4% increase in global sugar production, aiming for a record 186.024 MMT in 2024/25. It also noted a +0.8% rise in sugar consumption, predicting total use of 178.788 MMT, while estimating a decline in ending stocks 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 is 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.