Mixed Signals: Sugar Prices Face Pressure from Brazil and India Yet Show Signs of Recovery
March NY world sugar #11 (SBH25) closed lower on Monday by -0.04 (-0.19%), while March London ICE white sugar #5 (SWH25) rose by +1.40 (+0.27%).
Brazil’s Sugarcane Crush Impacts Market
Sugar prices ended the day mixed, with New York sugar marking a low not seen in 2-3/4 months. This decline is largely due to Brazil’s unexpected surge in sugarcane crushing. Recent data from Unica revealed that Brazil crushed 20.35 million metric tons (MMT) of sugarcane during the latter half of November, significantly exceeding the anticipated 15.5 MMT.
Short Covering Boosts Sugar Futures
Despite initial losses, sugar prices rebounded on Monday following signals of reduced sugar production in India. The National Federation of India Cooperative Sugar Factories Ltd announced that sugar output in India had fallen by 18% year-over-year, totaling 6.1 MMT from October 1 to December 15.
Global Supply Forecast Impacts Prices
The overall outlook for sugar supply worldwide is contributing to downward pressure on prices. On November 21, the International Sugar Organization (ISO) revised its forecast for the 2024/25 global sugar deficit to -2.51 MMT, an improvement from August’s estimate of -3.58 MMT. Additionally, the ISO increased its forecast for the 2023/24 global sugar surplus to 1.31 MMT, rising from +200,000 MT.
Thailand’s Anticipated Production Growth
Bearish trends for sugar prices are also shaped by anticipated increases in sugar production in Thailand. In its report dated October 29, Thailand’s Office of the Cane and Sugar Board predicted that the country’s sugar output for 2024/25 would rise by 18% year-over-year, reaching 10.35 MMT. This follows the production of 8.77 MMT in the previous season, solidifying Thailand’s position as the world’s third-largest sugar producer and second-largest exporter.
Sugar Production Declines in Brazil’s Center-South
Conversely, recent reductions in sugar output from Brazil’s Center-South region offer some support for prices. Last Thursday, Unica reported a cumulative decrease of 3.7% year-over-year in sugar production for 2024/25, totaling 39.361 MMT through November.
Environmental Factors Affecting Brazil’s Crop Yields
Wildfires fueled by drought and excessive heat earlier this year have adversely affected Brazilian sugar crops, particularly in Sao Paulo, the country’s leading sugar-producing state. The sugar cane industry group, Orplana, reported that around 2,000 fire outbreaks impacted approximately 80,000 hectares of sugarcane. Green Pool Commodity Specialists estimated up to 5 MMT of sugar cane may have been lost to these fires. In response, Brazil’s government crop forecasting agency, Conab, reduced its production estimate for 2024/25 from 46 MMT to 44 MMT due to expected lower yields.
India’s Policy Changes on Sugar Exports
In a move that may bolster sugar prices, India’s Food Ministry lifted restrictions on sugar mills producing ethanol for the 2024/25 year, commencing in November. This decision may extend India’s sugar export limitations. Last December, India mandated that sugar mills halt ethanol production from sugarcane for the 2023/24 supply year to enhance sugar reserves. Starting in October 2023, India limited sugar exports to maintain domestic supply, reducing allowable exports to 6.1 MMT in the 2022/23 season, down from a record 11.1 MMT the previous season. On October 3, the Indian Sugar and Bio-energy Manufacturers Association (ISM) indicated that India would have only 2 MMT available for export for the upcoming season, advocating for the removal of current export restrictions.
Looking Ahead: India’s Production Projections
The ISM further projected that sugar production in India for 2024/25 would decrease by 2% year-over-year to 33.3 MMT. Additionally, it estimated that India’s sugar reserves would be at 8.4 MMT as of September 30, a decline from an earlier estimate of 9.1 MMT made in May.
Global Sugar Production Trends
Supporting the outlook for sugar prices, the ISO on August 30 projected a reduction in global sugar production for 2024/25 to 179.3 MMT, which is down 1.1% from 181.3 MMT in 2023/24. Moreover, the USDA’s bi-annual report released on November 21 indicated that global sugar production would rise by 1.5%, reaching a record 186.619 MMT, while sugar consumption is expected to increase by 1.2%, hitting a new high of 179.63 MMT. The USDA also forecasts a decline in global sugar ending stocks for 2024/25, decreasing by 6.1% to 45.427 MMT.
On the date of publication, Rich Asplund did not hold any positions in the mentioned securities. All information in this article is for informational purposes only. For more on our disclosure policy, please view the Barchart Disclosure Policy here.
The views expressed in this article are those of the author and do not necessarily reflect those of Nasdaq, Inc.
