Sugar Prices Continue to Slide Amid Supply Surplus

Recent Trends: Market Shifts and Key Statistics

March NY world sugar #11 (SBH25) closed down -0.19 (-0.96%) on Wednesday, while March London ICE white sugar #5 (SWH25) dropped -3.40 (-0.66%).

On Wednesday, sugar prices extended the losses observed this week, with NY sugar reaching a three-month low and London sugar a four-month low. An unexpected increase in Brazil’s sugarcane crush has raised supply forecasts, placing downward pressure on prices. Unica reported last Thursday that Brazil crushed 20.35 million metric tons (MMT) of sugarcane in the latter half of November, exceeding expectations set at 15.5 MMT.

Currency Impacts and Global Supply Forecasts

The weakness of the Brazilian real (^USDBRL), which hit a record low against the dollar on Wednesday, exacerbates the decline in sugar prices. This drop in currency value facilitates export sales by Brazil’s sugar producers, further increasing global supply.

In line with an improved global supply outlook, the International Sugar Organization (ISO) reduced its global sugar deficit forecast for 2024/25 to -2.51 MMT, down from an earlier estimate of -3.58 MMT. Additionally, the ISO adjusted its 2023/24 global sugar surplus estimate up to 1.31 MMT from a previous figure of +200,000 MT.

Regional Production Insights

Thailand’s sugar production forecast is anticipated to rise, contributing to bearish pressure on sugar prices. The Office of the Cane and Sugar Board recently projected Thailand’s sugar production for 2024/25 will increase by 18% year-on-year to 10.35 MMT, compared to a yield of 8.77 MMT during the 2023/24 season.

On the other hand, reduced sugar output in India is providing some support for prices. The National Federation of India Cooperative Sugar Factories Ltd reported a decrease of 18% year-on-year in India’s sugar production from October 1 to December 15, totaling 6.1 MMT.

In Brazil, a decline in sugar output from the Center-South region creates a bullish sentiment for prices. Unica noted that cumulative sugar output in this area for the 2024/25 season is down 3.7% from last year, totaling 39.361 MMT.

Environmental Challenges and Policy Developments

The sugarcane industry in Brazil has faced significant challenges due to drought and excessive heat earlier this year. Fires in São Paulo, Brazil’s largest sugar-producing state, damaged crops across 80,000 hectares, according to the industry group Orplana. Green Pool Commodity Specialists estimate a loss of up to 5 MMT of sugarcane due to these fires. As a result, Conab, Brazil’s government crop forecasting agency, reduced its 2024/25 sugar production estimate from 46 MMT to 44 MMT.

In a move that could support sugar prices, India’s Food Ministry lifted restrictions on sugar mills producing ethanol for the 2024/25 year. This decision may prolong the sugar export curbs the country has enforced since October 2023 to ensure domestic availability. During the 2022/23 season, India allowed only 6.1 MMT of sugar exports, a significant drop from a record 11.1 MMT in the previous year. However, the Indian Sugar and Bio-energy Manufacturers Association (ISM) mentioned that India might have 2 MMT available for export next season and has urged the government to reconsider its export restrictions.

Additionally, the ISM forecasts that India’s sugar production for 2024/25 will fall by 2% year-on-year to 33.3 MMT, and that sugar reserves as of September 30 will amount to 8.4 MMT, compared to a previous estimate of 9.1 MMT.

Global Production Predictions

Notably, the ISO projects a slight decline in global sugar production for 2024/25, estimating it at 179.3 MMT, which is down 1.1% from 181.3 MMT in 2023/24. Meanwhile, the USDA’s bi-annual report released on November 21 anticipates global sugar production to reach a record 186.619 MMT for 2024/25, an increase of 1.5% compared to the previous year, with human sugar consumption expected to rise to 179.63 MMT. The USDA also predicts a 6.1% decline in global sugar ending stocks to 45.427 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 for informational purposes only. For more information, please view the Barchart Disclosure Policy here.

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