Sugar Prices Experience Decline Amid Supply Changes and Market Dynamics

March NY world sugar #11 (SBH25) is down -0.28 (-1.42%), while March London ICE white sugar #5 (SWH25) decreased by -5.70 (-1.11%).

Recent Trends Indicate Lower Sugar Prices

Today’s sugar prices are exhibiting moderate declines. Over the last three months, there’s been a general downtrend. Last Tuesday, NY sugar reached a nearest-futures low not seen in 3-1/2 months, and London sugar hit a 2-3/4 year low just the previous Monday, influenced by an improved outlook for sugar supply. In a recent update on November 21, the International Sugar Organization (ISO) revised its forecast for the global sugar deficit in 2024/25 to -2.51 MMT, a significant change from the -3.58 MMT projected in August. Additionally, ISO increased its 2023/24 global sugar surplus estimate to 1.31 MMT, up from a much smaller August estimate of +200,000 MT.

Indian Production Cuts Create Price Fluctuations

Last Thursday, sugar prices recovered slightly, reaching 2-1/2 week highs due to reports of decreased sugar production in India, the second-largest sugar producer globally. The Indian Sugar and Bio-energy Manufacturers Association (ISM) shared that India’s sugar production from October 1 to December 31 for 2024/25 was down -15.5% year-over-year, totaling 9.54 MMT. This decline may lead the Indian government to maintain export restrictions and limit availability in the global market.

Thailand’s Production Growth Poses Challenges

In contrast, forecasts for higher sugar production in Thailand raise concerns for sugar prices. On October 29, Thailand’s Office of the Cane and Sugar Board predicted an 18% rise in 2024/25 production, reaching 10.35 MMT, compared to 8.77 MMT produced during the 2023/24 season. Thailand ranks as the third-largest sugar producer and second-largest exporter worldwide.

Government Policies Influence Export Potential

On December 19, India’s Food Secretary, Chopra, mentioned that India might permit sugar exports if a surplus is determined after meeting domestic ethanol blending targets. Currently, the Indian government estimates a sugar surplus of around 1 MMT this season.

Impact of Climate Conditions on Brazilian Sugar Production

Recent drought and extreme heat in Brazil resulted in fires that devastated sugar crops in São Paulo, the country’s leading sugar-producing state. Orplana, the sugar cane industry group, reports that about 2,000 fires affected roughly 80,000 hectares of sugarcane. Green Pool Commodity Specialists estimate a loss of approximately 5 MMT of sugar cane due to these incidents. Brazil’s government forecasting agency, Conab, has adjusted its 2024/25 sugar production estimate downward to 44 MMT, down from 46 MMT, based on lower yields from the drought. Unica, the sugar industry authority, reported a cumulative output decline of -5.1% year-over-year for Center-South sugar through mid-December, totaling 39.711 MMT, with operational mills decreasing from 185 to just 129 compared to the previous year.

India’s Ethanol Restrictions Affect Export Strategy

An encouraging sign for sugar prices arose on August 30 when India’s Food Ministry lifted restrictions on sugar mills regarding ethanol production for the upcoming 2024/25 year. Last December, India had mandated sugar mills to halt ethanol production to enhance sugar reserves, restricting sugar exports since October 2023 to maintain domestic supply levels. During the 2022/23 season, India allowed mills to export only 6.1 MMT of sugar, a decrease from the record 11.1 MMT in the prior season. Despite this trend, ISM reported on October 3 that India expects to have 2 MMT of sugar available for export next season and is advocating for lifting current export restrictions.

Future Projections and Market Dynamics

The ISM projected a -2% year-over-year decrease in India’s 2024/25 sugar production, estimating it at 33.3 MMT. Furthermore, the National Federation of India Cooperative Sugar Factories Ltd noted that production from October 1 to December 15 was down -18% year-over-year to 6.1 MMT.

Additionally, the ISO reported on August 30 a global sugar production forecast of 179.3 MMT for 2024/25, reflecting a -1.1% decline from the 181.3 MMT estimated for 2023/24. The USDA’s bi-annual report published on November 21 projected a +1.5% year-over-year increase in global sugar production to a record 186.619 MMT, with human consumption expected to rise by +1.2% to 179.63 MMT. The report also indicated a -6.1% reduction in global sugar ending stocks year-over-year, now estimated at 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.