Sugar Market Faces Pressure Amid Mixed Price Movements

Friday Trading Sees Sugar Prices React to Crude Oil Drops

March NY world sugar #11 (SBH25) closed up +0.02 (+0.09%) on Friday, while March London ICE white sugar #5 (SWH25) ended down -1.80 (-0.32%).

Sugar prices saw a mixed outcome on Friday after starting strong. The decline in crude prices (CLZ24) by -2% to a two-week low led to a wave of selling in sugar futures. The low crude prices are expected to affect ethanol markets, potentially encouraging sugar mills around the globe to shift their focus from ethanol to sugar production, which could increase sugar supplies.

This week, sugar prices have faced challenges, dropping to their lowest levels in 1-3/4 months on Wednesday, partly influenced by the dollar index (DXY00) soaring to a one-year high.

In Thailand, a forecast of increased sugar production dampens price expectations. Thailand’s Office of the Cane and Sugar Board projected a remarkable +18% year-over-year rise in sugar production for the 2024/25 season, anticipating a total output of 10.35 million metric tons (MMT). In the previous season (2023/24), Thailand produced 8.77 MMT, maintaining its status as the world’s third-largest sugar producer and second-largest exporter.

Meanwhile, farmers in India are hopeful that better-than-average monsoon rains will lead to a fruitful sugar harvest. The Indian Meteorological Department announced 934.8 mm of rainfall during this year’s monsoon season, marking the highest level in four years and exceeding the historical average of 868.6 mm. This monsoon season spanned from June to September.

On a positive note for sugar prices, a report from Unica indicated that sugar production in Brazil’s Center-South region fell by -24.3% year over year during the latter half of October, totaling 1.785 MMT. However, the cumulative sugar output through October for the 2024/25 season managed a slight increase of +0.3% year over year, totaling 37 MMT.

Brazil has faced troubling weather conditions, with recent droughts and heat leading to fires that have harmed sugar crops in the key producing state of Sao Paulo. The sugar cane industry group Orplana reported approximately 2,000 fire outbreaks affecting up to 80,000 hectares of sugarcane. Green Pool Commodity Specialists estimate a loss of up to 5 MMT of sugar cane due to the devastation. On August 22, Brazil’s government crop forecasting agency, Conab, decreased its overall sugar production estimate for the 2024/25 season to 42 MMT, down from 42.7 MMT, attributing this to lower yields resulting from drought and excessive heat. Similarly, on September 20, Rabobank revised its production forecast down to 39.3 MMT from 40.3 MMT due to continued dry conditions, and Datagro lowered its estimate to 38.7 MMT from 39.3 MMT.

Support for sugar prices also came on August 30 when India’s Food Ministry lifted restrictions on sugar mills producing ethanol for the 2024/25 season starting in November. This move may extend India’s sugar export limitations. Since October 2023, India has curtailed sugar exports to maintain sufficient domestic supplies. For the 2022/23 season, only 6.1 MMT of sugar was allowed for export, a significant drop from the record 11.1 MMT in the previous year. However, on October 3, the Indian Sugar and Bio-energy Manufacturers Association (ISM) stated that India would have 2 MMT of sugar available for export in the coming season and requested the government to relax existing export restrictions.

According to the ISM’s report published on May 13, India’s sugar production for the 2023/24 season was down -1.6% year over year at 31.4 MMT. Moreover, on September 26, ISM projected a further -2% decline for the 2024/25 season, with an estimated output of 33.3 MMT and a reduction in sugar reserves to 8.4 MMT as of September 30, down from a May forecast of 9.1 MMT.

In a broader context, the International Sugar Organization (ISO) forecasted a global sugar deficit of -3.58 MMT for the 2024/25 season, a stark contrast to an estimated -200,000 MT deficit for 2023/24. The ISO also projected global sugar production at 179.3 MMT, marking a -1.1% decrease from 181.3 MMT in 2023/24.

The USDA’s bi-annual report released on May 23 predicted that global sugar production would increase by +1.4% year over year to a record 186.024 MMT, with human sugar consumption expected to rise +0.8% year over year to a record 178.788 MMT. The USDA also anticipated that the 2024/25 global sugar ending stocks would decline by -4.7% year over year to a low of 38.339 MMT.

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 are 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.