Sugar Prices Face Pressure Amid Mixed Global Production Forecasts
On Thursday, March NY world sugar #11 (SBH25) closed down -0.25 (-1.27%), while March London ICE white sugar #5 (SWH25) closed lower by -2.40 (-0.47%).
Recent Trends in Sugar Prices
This week, sugar prices continued to decline sharply. NY sugar hit a three-month low, and London sugar reached a four-month low. Pressures intensified after India’s Food Secretary, Chopra, indicated that India may allow sugar exports if domestic ethanol blending requirements are satisfied. Presently, the Indian government estimates a sugar surplus of about 1 million metric tons (MMT) for this season.
Brazil’s Impact on Sugar Production
A significant factor putting downward pressure on sugar prices is Brazil’s larger-than-expected sugarcane crush. According to Unica, Brazil crushed 20.35 MMT of sugarcane in the second half of November, surpassing expectations of 15.5 MMT.
The Brazilian real’s recent weakness is also affecting sugar prices, with the currency hitting a record low against the dollar on Wednesday. A weaker real makes Brazilian exports more attractive, increasing global sugar supplies.
Global Supply Projections
The International Sugar Organization (ISO) has revised its 2024/25 sugar deficit forecast to -2.51 MMT from an earlier estimate of -3.58 MMT in August. Furthermore, it raised the global sugar surplus estimate for 2023/24 to 1.31 MMT, up from 200,000 MT.
Thailand’s Rising Production Predicted
Thailand is expected to increase its sugar production significantly. As reported on October 29, the Office of the Cane and Sugar Board projected a production rise of 18% year-on-year to 10.35 MMT. For perspective, Thailand produced 8.77 MMT of sugar in the 2023/24 season that concluded in April. Being the world’s third-largest sugar producer, this could influence global market dynamics.
India’s Production and Export Restrictions
On the other hand, reduced output in India is supporting sugar prices. The National Federation of India Cooperative Sugar Factories Ltd noted that India’s sugar production from October 1 to December 15 fell 18% year-on-year to 6.1 MMT.
Additionally, the Indian government’s restrictions on sugar mills producing ethanol may prolong the curbs on sugar exports. From December 2022, India had halted the use of sugarcane for ethanol production to strengthen its sugar reserves. The government has limited sugar exports to 6.1 MMT for the 2022/23 season, a drop from a record high of 11.1 MMT in the previous season.
Weather-Related Challenges in Brazil
Earlier this year, Brazil faced drought and excessive heat, leading to destructive fires in its top sugar-producing state of São Paulo. Orplana, an industry group, reported that approximately 2,000 fire outbreaks impacted up to 80,000 hectares of sugarcane. Green Pool Commodity Specialists estimated that around 5 MMT of sugar cane were lost. In light of this, Brazil’s governmental agency Conab lowered its 2024/25 sugar production estimate to 44 MMT from 46 MMT due to anticipated lower yields.
Outlook on Global Sugar Production
The International Sugar Organization forecasts a slight decline in global sugar production for 2024/25, predicting 179.3 MMT, a 1.1% decrease from 181.3 MMT in 2023/24. In contrast, the USDA’s bi-annual report, released on November 21, anticipates a 1.5% increase in global sugar production to a record 186.619 MMT and a 1.2% rise in consumption to 179.63 MMT.
On the date of publication, Rich Asplund did not hold (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data herein are for informational purposes only. For more details, please view the Barchart Disclosure Policy.
The views expressed in this article represent those of the author and do not necessarily reflect those of Nasdaq, Inc.
