Sugar Prices See Modest Gains Amid Mixed Weather and Supply Forecasts

Resilient Market Dynamics Confront Brazilian Droughts and India’s Production Hopes

March NY world sugar #11 (SBH25) on Tuesday closed up +0.12 (+0.55%), while December London ICE white sugar #5 (SWZ24) increased by +4.00 (+0.71%).

On Tuesday, sugar prices ticked higher, rebounding from a one-week low seen on Monday. However, Indian sugar mills renewed calls for government permission to export 2 million metric tons of sugar immediately, citing a surplus in the nation’s production as a pain point for prices.

In Brazil, rain forecasts for the Center-South region this week may allay drought concerns, which would be considered bearish for sugar prices. Meteorologists at Climatempo have projected that rain will maintain milder temperatures and enhance soil moisture levels.

The market was also pressured after Unica reported last Friday that sugar output in Brazil’s Center-South in the first half of October rose +8% year-over-year to 2.443 million metric tons. Cumulative sugar production for the 2024/25 season through mid-October increased by +1.9% to 35.591 million metric tons.

Additionally, funds holding excessive long positions in London sugar could prompt liquidation, potentially exacerbating any price declines. According to the latest Commitment of Traders (COT) report from last Friday, funds increased their net-long positions in London sugar by 954, bringing the total to 42,351, the highest since 2011.

Brazil’s top sugar-producing state of São Paulo has faced recent drought and intense heat, resulting in fires that damaged crops. The sugar cane industry group Orplana stated that around 2,000 fire outbreaks impacted up to 80,000 hectares of sugarcane. Green Pool Commodity Specialists estimated a loss of up to 5 million metric tons of sugarcane due to these incidents. Following this, Brazil’s government crop forecasting agency, Conab, revised downward its overall 2024/25 sugar production estimate on August 22 to 42 million metric tons, down from 42.7 million metric tons, because of diminished sugarcane yields. Rabobank also lowered its forecast on September 20, reducing predicted production to 39.3 million metric tons from an earlier estimate of 40.3 million metric tons. Similarly, Datagro decreased its 2024/25 projection on Monday to 38.7 million metric tons, citing challenges from drought and limited milling capacity.

In contrast, optimism surrounding above-average monsoon rains in India could lead to a bumper sugar crop, which is negatively affecting sugar prices. The Indian Meteorological Department reported that as of September 30, India received 934.8 mm of rain during the current monsoon season, the most in four years and 7.6% more than the long-term average of 868.6 mm. India’s monsoon season typically runs from June through September.

Supporting sugar prices, India’s Food Ministry lifted restrictions on sugar mills producing ethanol for the 2024/25 year starting in November, which may prolong existing sugar export curbs. In December, India had previously ordered mills to halt the use of sugarcane for ethanol production for the 2023/24 fiscal year to bolster sugar reserves. Since October 2023, India has limited sugar exports to ensure adequate domestic supplies. Mills were allowed to export only 6.1 million metric tons during the 2022/23 season—down from a record 11.1 million metric tons the previous season. The Indian Sugar and Bio-energy Manufacturers Association (ISM) urged the government on October 3 to lift current export restrictions, stating that India will have 2 million metric tons of sugar to export next season.

According to the ISM’s May 13 report, sugar production in India for the 2023/24 period from October to April shrank by -1.6% year-on-year to 31.4 million metric tons. Additionally, the ISM projected a -2% year-on-year reduction in 2024/25 production to 33.3 million metric tons, while reserves for 2023/24 were revised to 8.4 million metric tons as of September 30, down from a previous projection of 9.1 million metric tons made in May.

The outlook for increased sugar production in Thailand remains bearish for sugar prices. Thailand’s Office of the Cane and Sugar Board has forecasted a significant production rise for 2024/25, estimating an 18% year-on-year increase to 10.35 million metric tons. Thailand, recognized as the world’s third-largest sugar producer, produced 8.77 million metric tons during the 2023/24 season that concluded in April.

In a contrasting view, the International Sugar Organization (ISO) forecasted a global sugar deficit of -3.58 million metric tons for 2024/25, substantially larger than the estimated -200,000 metric tons deficit for the previous season. The ISO also projected global sugar production to be 179.3 million metric tons in 2024/25, reflecting a -1.1% decrease from 181.3 million metric tons in 2023/24.

The USDA, in its bi-annual report released on May 23, anticipates global sugar production for 2024/25 to increase by +1.4% year-on-year to a record 186.024 million metric tons, while global consumption is expected to rise +0.8% year-on-year to reach a record 178.788 million metric tons. Additionally, the USDA forecasts a -4.7% year-on-year decline in global sugar ending stocks, marking a 13-year low of 38.339 million metric tons.

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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 here.

The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.