Weekly Sugar Market Update: Prices See Minor Recovery After Major Declines
March Sugar Prices Rise Despite Recent Low Points
March NY world sugar #11 (SBH25) closed up +0.11 (+0.57%) on Friday, while March London ICE white sugar #5 (SWH25) increased by +1.29 (+0.24%). Sugar prices saw a slight rise on Friday following a period of significant losses. Notably, on Thursday, NY sugar reached a three-month low, and London sugar hit a four-month low. This decline was influenced by India’s Food Secretary, Chopra, suggesting the potential for sugar exports should a domestic surplus arise after meeting ethanol blending requirements. Currently, India estimates a sugar surplus of about 1 million metric tons (MMT) for the season.
Brazil’s Sugar Production and Currency Fluctuations Impact Prices
Prices came under pressure last week due to unexpected developments in Brazil’s sugarcane production. The Brazilian sugarcane crush reached 20.35 MMT in the second half of November, surpassing the anticipated 15.5 MMT, as reported by Unica. A notable 1.3% recovery in the Brazilian real (^USDBRL) on Friday also supported sugar prices after the currency had earlier dropped to a record low against the dollar, leading Brazilian sugar producers to increase exports.
Global Supply Outlook Shifts as Production Estimates Change
An improved global supply outlook is contributing to decreased sugar prices. The International Sugar Organization (ISO) revised its global sugar deficit forecast for 2024/25 to -2.51 MMT from an earlier outlook of -3.58 MMT. Additionally, the ISO increased its 2023/24 global sugar surplus estimate to 1.31 MMT, significantly higher than the previous projection of +200,000 MT.
Anticipated Production Increase in Thailand May Limit Prices
Forecasters predict a surge in Thailand’s sugar production, which poses a bearish risk to prices. Thailand’s Office of the Cane and Sugar Board recently estimated a jump in production by 18% year-over-year to 10.35 MMT for the 2024/25 season, up from 8.77 MMT in the previous season. Notably, Thailand ranks as the world’s third-largest sugar producer and the second-largest exporter.
India’s Declining Sugar Production Provides Price Support
While production prospects in Thailand loom, reduced output in India is likely to support sugar prices. The National Federation of India Cooperative Sugar Factories Ltd reported a significant -18% year-over-year decrease in sugar production for the period of October 1 to December 15, totaling 6.1 MMT.
Challenges in Brazil’s Center-South Region Bolster Prices
Conversely, sugar output in Brazil’s Center-South region is declining, which may act as a bullish factor for prices. Unica’s recent report indicated that cumulative sugar output in this area for 2024/25 through November dropped by -3.7% year-over-year to 39.361 MMT. Adverse conditions earlier this year, including drought and excessive heat, caused devastating fires in Brazil, particularly in Sao Paulo, damaging thousands of hectares of sugarcane.
India’s Sugar Policy and Export Restrictions Remain Key Factors
In late August, India’s Food Ministry lifted restrictions on sugar mills producing ethanol for the upcoming 2024/25 year, which may prolong existing sugar export limits. The Indian government first implemented these restrictions last December to maintain adequate domestic supply. Consequently, India could only export 6.1 MMT of sugar during the 2022/23 season, a decline from the previous record of 11.1 MMT. Despite this, the Indian Sugar and Bio-energy Manufacturers Association (ISM) projected that India would have 2 MMT available for export next season and called for a reevaluation of current restrictions.
Global Sugar Production Forecasts: Mixed Signals
On September 26, the ISM estimated that India’s 2024/25 sugar production might decrease by -2% to 33.3 MMT, with sugar reserves expected to sit at 8.4 MMT by September 30, compared to earlier forecasts of 9.1 MMT. Moreover, the ISO forecasted a slight reduction in global sugar production for 2024/25 to 179.3 MMT, down -1.1% from 181.3 MMT in the prior season.
Lastly, the USDA, in its bi-annual report released on November 21, projected a positive outlook for global sugar production, anticipating a +1.5% increase for 2024/25, reaching a record 186.619 MMT, along with a projected rise of +1.2% in global consumption to a record 179.63 MMT. The USDA also expects a decline in global sugar ending stocks to 45.427 MMT, representing a -6.1% decrease year-over-year.
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 is solely for informational purposes. For more information please view the Barchart Disclosure Policy
here.
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