Global Sugar Prices Fall as Production Outlook Improves

On Tuesday, March NY world sugar #11 (SBH25) closed down -0.46 (-2.14%), while March London ICE white sugar #5 (SWH25) ended down -16.30 (-2.94%).

Weather Forecasts Impact Sugar Prices

Sugar prices dropped on Tuesday, with New York sugar hitting a one-week low and London sugar dropping to a one-month low. The decline is attributed to rainfall forecasts in Brazil’s Center-South, its primary sugar-producing region.

Supply Projections Weigh on Market

Last week, New York sugar hit a low not seen in two and a half months as the outlook for global sugar supply brightened. On November 21, the International Sugar Organization (ISO) revised its forecast for a global sugar deficit in 2024/25 to -2.51 million metric tons (MMT), an improvement from the August estimate of -3.58 MMT. Additionally, ISO raised its global sugar surplus estimate for 2023/24 to 1.31 MMT, up from an earlier projection of +200,000 metric tons.

Thailand’s Sugar Production Set to Rise

An increase in Thailand’s sugar production is contributing to bearish trends for sugar prices. Thailand’s Office of the Cane and Sugar Board projects that sugar production for 2024/25 will rise by 18% year-on-year, reaching 10.35 MMT. This follows the 8.77 MMT produced in the 2023/24 season ending in April. As the world’s third-largest sugar producer and second-largest exporter, Thailand’s increases can heavily impact the global market.

Brazil’s Ongoing Challenges

Conversely, Brazil’s production in the Center-South has declined recently. Unica reported a significant drop in output during the first half of November, falling 59.2% year-on-year to 898 metric tons. Overall, through mid-November, the cumulative 2024/25 output in this region is down 3.0% year-on-year, totaling 38.274 MMT.

The challenges stem from last year’s drought and intense heat, which led to fires damaging crops, particularly in São Paulo state. The sugar cane industry group Orplana indicated that approximately 2,000 fire outbreaks affected 80,000 hectares of planted sugarcane. Green Pool Commodity Specialists estimated losses could be as high as 5 MMT of sugar cane. In light of these issues, Brazil’s government crop forecasting agency, Conab, reduced its sugar production estimate for 2024/25 to 44 MMT, down from an earlier forecast of 46 MMT, citing lower yields.

India’s Export Restrictions

Meanwhile, India’s Food Ministry lifted restrictions on sugar mills producing ethanol for the 2024/25 year beginning in November, potentially extending sugar export limitations. In December, India mandated that sugar mills halt ethanol production from sugarcane to bolster domestic sugar reserves. The country has capped sugar exports since October 2023, limiting exports to 6.1 MMT during the 2022/23 season, a significant decrease from the previous season’s 11.1 MMT. The Indian Sugar and Bio-energy Manufacturers Association (ISM) noted that India could potentially export 2 MMT in the upcoming season while requesting the government reconsider current export limitations.

Production Trends in India

According to the ISM, India’s 2023/24 sugar production from October to April fell by 1.6% year-on-year to 31.4 MMT. Projections for 2024/25 indicate a further decline by 2% year-on-year to 33.3 MMT. India’s sugar reserves are expected to drop from a previously projected 9.1 MMT to 8.4 MMT by September 30.

Future Market Expectations

The ISO forecasts global sugar production for 2024/25 at 179.3 MMT, showing a decrease of 1.1% from 181.3 MMT in the current year. Conversely, the USDA in its bi-annual report projected an increase for 2024/25, estimating global sugar production to rise by 1.5% year-on-year to reach a record 186.619 MMT. They also expect global consumption to increase by 1.2% to 179.63 MMT, while ending stocks are projected to decline by 6.1% year-on-year to 45.427 MMT.

On the date of publication,

Rich Asplund

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