Sugar Market Update: Prices Steady Amid Weather Woes and Production Projections
On Tuesday, March NY world sugar #11 (SBH25) closed unchanged, while March London ICE white sugar #5 (SWH25) rose by +6.20 (+1.21%).
Recent Trends and Market Outlook
Sugar prices showed slight consolidation above the recent lows from last Thursday, when NY sugar hit a 3-month low and London sugar reached a 4-month low. Although prices found some support, the market remains cautious ahead of Unica’s upcoming report detailing Brazil’s sugar production for the first half of December.
India’s Export Possibilities and Global Effects
Last Thursday, prices dropped after India’s Food Secretary Chopra indicated that the nation might permit sugar exports if a surplus is realized after meeting domestic ethanol blending demands. The Indian government estimates a sugar surplus of approximately 1 million metric tons (MMT) this season.
Furthermore, the Brazilian real has weakened recently, pressuring sugar prices lower by encouraging Brazilian producers to export more. The real has only slightly rebounded from last Thursday’s record low against the dollar.
Global Supply and Production Insights
The International Sugar Organization (ISO) recently revised its forecast, lowering the 2024/25 global sugar deficit to -2.51 MMT, an improvement from the -3.58 MMT projected in August. Additionally, ISO raised its 2023/24 global sugar surplus estimate to 1.31 MMT, a notable increase from the prior projection of +200,000 MT.
Thailand’s Production Boost and India’s Supportive Factors
An anticipated surge in Thailand’s sugar output is contributing to a bearish sentiment in the market. The Office of the Cane and Sugar Board in Thailand projected a +18% increase year-on-year, forecasting production at 10.35 MMT for the 2024/25 season. In contrast, India’s sugar production has declined. The National Federation of India Cooperative Sugar Factories Ltd reported a year-on-year decrease of -18% from October 1 to December 15, resulting in 6.1 MMT of sugar produced.
Concerns from Brazil and Drought Impact
Brazil’s recent decline in sugar output also supports higher prices. A report from Unica noted a -3.7% year-on-year drop in cumulative 2024/25 Center-South sugar output through November, totaling 39.361 MMT. Fires caused by drought and excessive heat this year have devastated crops in Brazil’s leading sugar-producing state of Sao Paulo. The sugarcane industry group Orplana estimated that around 2,000 fire outbreaks impacted up to 80,000 hectares of planted sugar cane, resulting in a loss of 5 MMT of sugar cane. Consequently, Brazil’s government crop forecasting agency, Conab, revised its sugar production estimate to 44 MMT from a previous forecast of 46 MMT, citing lower yields due to adverse weather conditions.
India’s Policy Changes and Future Projections
In August, the Indian Food Ministry lifted restrictions on sugar mills producing ethanol for the 2024/25 year, potentially prolonging sugar export curbs. Since October 2023, India has restricted sugar exports to maintain sufficient domestic supplies, allowing only 6.1 MMT during the 2022/23 season compared to a record 11.1 MMT previously. However, the Indian Sugar and Bio-energy Manufacturers Association (ISM) projected that India could have 2 MMT of sugar to export next season.
ISM also forecasts a -2% decline in India’s 2024/25 sugar production to 33.3 MMT, while sugar reserves are expected to stand at 8.4 MMT on September 30, down from 9.1 MMT earlier this year.
USDA’s Production Forecast and Global Consumption
In its bi-annual report released on November 21, the USDA predicted a +1.5% increase in global sugar production for 2024/25, setting a record at 186.619 MMT. Moreover, global sugar consumption is expected to rise by +1.2% to reach 179.63 MMT, while global ending stocks may decline by -6.1% 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 solely for informational purposes. For more information, please view the Barchart Disclosure Policy here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
