Sugar Prices Fluctuate Amidst Production Forecasts and Weather Conditions

Today, March NY world sugar #11 (SBH25) has risen by +0.13 (+0.61%), while December London ICE white sugar #5 (SWZ24) has decreased by -7.60 (-1.38%).

Sugar market activity showed mixed trends after recovering from early losses. Following a report from Unica, sugar futures experienced short covering due to a -24.3% year-on-year decline in sugar output in Brazil’s Center-South region for late October, totaling 1.785 million metric tons (MMT). However, for the cumulative production in 2024/25 through October, output has increased by +0.3% year-on-year to 37 MMT. Initially, sugar prices fell as the dollar index (DXY00) surged to a high not seen in over four months.

Funds holding large long positions in London sugar futures may trigger sell-offs if prices decline. The latest Commitment of Traders (COT) report indicates that funds raised their net-long positions in London sugar by 1,457 contracts in the week ending November 5, reaching a total of 44,261 net-long positions—the highest since records began in 2011.

Brazilian sugar crops have faced severe setbacks from recent drought and heat, resulting in widespread fires in Sao Paulo, the country’s largest sugar-producing state. The industry group Orplana reported that approximately 2,000 fire incidents impacted up to 80,000 hectares of sugarcane. Analysts at Green Pool Commodity Specialists estimate that these fires may have destroyed as much as 5 MMT of sugarcane. Following these developments, Brazil’s government crop forecasting agency, Conab, revised its 2024/25 Center-South sugar production estimate down from 42.7 MMT to 42 MMT on August 22, attributing the reduction to lower yields. Similarly, Rabobank lowered its forecast for the same production year from 40.3 MMT to 39.3 MMT on September 20. Additionally, Datagro, on Monday, adjusted its estimate from 39.3 MMT to 38.7 MMT, again due to the impact of drought.

On the other side of the globe, expectations of above-average monsoon rains in India are casting a bearish outlook on sugar prices. The Indian Meteorological Department reported rainfall of 934.8 mm during the current monsoon season, a figure not seen in four years, and 7.6% above the long-term average of 868.6 mm. The monsoon season in India typically stretches from June to September.

A supportive factor for sugar prices emerged when India’s Food Ministry lifted restrictions on ethanol production from sugar mills for the 2024/25 year starting in November. This move may prolong the existing sugar export curbs. Last December, to boost domestic sugar reserves, India ordered mills to cease using sugarcane for ethanol production in the 2023/24 supply year. India has enforced sugar export restrictions since October 2023 to maintain adequate local supply. Only 6.1 MMT of sugar exports were permitted during the 2022/23 season, a significant drop from a record 11.1 MMT in the previous year. However, on October 3, the Indian Sugar and Bio-energy Manufacturers Association (ISM) reported that India could have 2 MMT available for export next season, urging the government to reconsider current restrictions.

In an earlier report on May 13, the ISM indicated that India’s 2023/24 sugar production from October to April had declined by -1.6% year-on-year, to 31.4 MMT. On September 26, ISM projected a further -2% year-on-year drop in sugar production for 2024/25, estimating output at 33.3 MMT. Additionally, the ISM revised India’s sugar reserves for September 30 down to 8.4 MMT from an earlier projection of 9.1 MMT.

The sugar market is also reacting to projected increases in Thailand’s production, seen as bearish for prices. On October 29, Thailand’s Office of the Cane and Sugar Board anticipated that the country’s sugar production for 2024/25 would rise by +18% year-on-year to 10.35 MMT. For reference, Thailand produced 8.77 MMT during the 2023/24 season, solidifying its status as the world’s third-largest sugar producer and second-largest sugar exporter.

Adding to the global sugar narrative, the International Sugar Organization (ISO) has forecasted a significant global sugar deficit of -3.58 MMT for the 2024/25 period, considerably larger than the estimated -200,000 metric ton deficit for the 2023/24 year. The ISO also predicts a slight decline in 2024/25 global sugar production, totalizing 179.3 MMT, down -1.1% year-on-year from 181.3 MMT in 2023/24.

According to the USDA’s biannual report released on May 23, global sugar production for 2024/25 is expected to increase by +1.4% year-on-year to reach a record 186.024 MMT, while human sugar consumption is forecasted to rise by +0.8% year-on-year to an all-time high of 178.788 MMT. Consequently, global sugar ending stocks for that year are projected to fall by -4.7% year-on-year, reaching a 13-year low of 38.339 MMT.

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On the date of publication, Rich Asplund did not hold any positions in the securities mentioned in this article. All data and information in this article are for informational purposes only. For further details, please view the Barchart Disclosure Policy.

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