Sugar Prices Reach Two-Week Highs Amid Brazilian Rain Forecast
March NY world sugar #11 (SBH25) today is up +0.54 (+2.43%), and December London ICE white sugar #5 (SWZ24) is up +8.80 (+1.54%).
Rain in Brazil May Impact Sugar Supply
Sugar prices surged to two-week highs today, driven by concerns that heavy rain in Brazil could delay the sugarcane harvest, tightening short-term sugar supplies. Climatempo, a meteorological agency, has predicted substantial rainfall starting this Saturday in Brazil’s Center-South region, known for its sugar production.
Price Fluctuations Due to Supply Reports
Earlier this week, sugar prices dipped to one-week lows after Unica reported that sugar output in Brazil’s Center-South region increased by 8% year-over-year in the first half of October, reaching 2.443 million metric tons (MMT). Cumulative production for the 2024/25 season also rose 1.9% to 35.591 MMT. The prices weakened further when India’s Sugar Mills requested government permission on Tuesday to export 2 million MMT of sugar due to a surplus.
Speculative Trading and Fund Positions
There is also concern about the large long positions held by funds in London sugar, which may lead to further price declines. According to last Friday’s Commitment of Traders (COT) report, funds increased their net-long positions in London sugar by 954 to reach 42,351, the highest level since data collection began in 2011.
Impact of Drought and Fires in Brazil
Recent drought conditions and excessive heat have led to fires in Sao Paulo, Brazil’s primary sugar-producing state. The sugar cane industry group Orplana reported that approximately 2,000 fire outbreaks affected about 80,000 hectares of sugarcane. It is estimated that up to 5 MMT of sugarcane might have been lost due to these fires. Following this, Conab reduced its forecast for 2024/25 sugar production in Brazil from 42.7 MMT to 42 MMT due to lower yields. Rabobank and Datagro also cut their forecasts, with Datagro estimating production at 38.7 MMT.
Optimism in India’s Sugar Production
In India, expectations of a large sugar crop due to favorable monsoon rains may pressure prices. The Indian Meteorological Department noted that rainfall during the current monsoon season has been the highest in four years, at 934.8 mm, surpassing the long-term average by 7.6%. India’s monsoon season spans from June to September.
Government Actions Affecting Sugar Exports
India’s Food Ministry lifted restrictions on ethanol production from sugar, potentially extending export curbs. Since October 2023, India has limited sugar exports to support domestic supplies, allowing only 6.1 MMT last season after a record 11.1 MMT the previous year. The Indian Sugar and Bio-energy Manufacturers Association (ISM) expects 2 MMT of exportable sugar next season and is pushing for lifted restrictions.
Production Estimates and Global Trends
The ISM noted a decline in India’s sugar production from October to April, which fell 1.6% to 31.4 MMT. For 2024/25, projections suggest further decline to 33.3 MMT. The ISO predicts a global sugar deficit of 3.58 MMT for 2024/25, which may support prices, contrasting with the USDA’s forecast of a 1.4% year-on-year increase in global sugar production to 186.024 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.
