Sugar Prices Slip Amid Rising Global Supplies
March NY world sugar #11 (SBH25) dipped by -0.15 (-0.76%), while March London ICE white sugar #5 (SWH25) fell by -0.10 (-0.02%).
Sharp Losses for Sugar Prices This Week
This week has seen significant declines in sugar prices, with NY sugar hitting a three-month low and London sugar reaching a four-month low. The downward trend has intensified following comments from India’s Food Secretary, Sudhanshu Pandey, indicating that India may permit sugar exports if a surplus exists after meeting domestic ethanol blending needs. Currently, the Indian government forecasts a sugar surplus of about 1 million metric tons (MMT) for the season.
Brazil’s Increased Sugarcane Crush
Adding to the pressure on sugar prices, Brazil’s sugarcane crush surpassed expectations. In the second half of November, Unica reported a crush of 20.35 MMT, significantly above the anticipated 15.5 MMT. This larger-than-expected output could enhance sugar supply globally.
Impact of Currency Fluctuations
The Brazilian real’s ongoing depreciation against the dollar is another factor contributing to falling sugar prices. The real recently reached a record low, making Brazilian sugar more attractive for export and thereby increasing global supplies.
Global Supply Outlook Improves
An upward revision in the global sugar supply outlook has further pressured sugar prices. The International Sugar Organization (ISO) updated its 2024/25 deficit forecast to -2.51 MMT, a change from August’s estimate of -3.58 MMT. Additionally, ISO now expects a global sugar surplus of 1.31 MMT for 2023/24, a substantial increase from the earlier projection of just 200,000 MT.
Thailand’s Projected Production Growth
In Thailand, expectations of increased sugar production could also bear down on prices. The Office of the Cane and Sugar Board recently predicted a jump in production of 18% year-over-year to 10.35 MMT for 2024/25, compared to 8.77 MMT from the 2023/24 season. As the world’s third-largest sugar producer, Thailand’s increased output may further saturate the market.
Indian Sugar Production Decline
Conversely, reduced sugar output in India offers some support for prices. The National Federation of India Cooperative Sugar Factories Ltd reported an 18% year-over-year decline in sugar production, totaling 6.1 MMT for the period from October 1 to December 15.
Challenges in Brazil’s Sugarcane Production
Brazil’s Center-South region has also faced challenges, as recent reports show a reduction in sugar production. Unica noted that cumulative output for 2024/25 through November is down by 3.7% year-over-year to 39.361 MMT. This decline is partly due to drought conditions and fires that affected around 80,000 hectares of sugarcane, according to industry group Orplana.
Exploring India’s Export Restrictions
To further complicate the situation, India’s Food Ministry lifted restrictions on ethanol production from sugar mills for the 2024/25 year. This move could extend India’s sugar export curbs since the country has already limited sugar exports starting October 2023 to ensure adequate domestic supplies. In the previous season, India allowed only 6.1 MMT of sugar exports, down from a record 11.1 MMT.
Future Projections
The Indian Sugar and Bio-energy Manufacturers Association (ISM) projects a slight decrease in India’s sugar production for 2024/25, estimating a 2% drop to 33.3 MMT. Meanwhile, the ISO’s forecast for global sugar production in 2024/25 stands at 179.3 MMT, down 1.1% from 2023/24’s production levels.
USDA’s Outlook on Global Sugar Markets
In a recent bi-annual report, the USDA projected a record global sugar production for 2024/25 at 186.619 MMT, a 1.5% increase year-over-year. Human sugar consumption is also expected to rise by 1.2% to reach 179.63 MMT, although ending stocks are predicted to decrease by 6.1% to 45.427 MMT.
On the date of publication, Rich Asplund did not hold any positions in the securities mentioned in this article. All information and data provided 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.
