Sugar Prices Decline Further Amid Global Supply Surplus

Recent Trends Reveal Significant Reductions in Sugar Futures

March NY world sugar #11 (SBH25) today decreased by -0.05 (-0.26%), while March London ICE white sugar #5 (SWH25) fell by -3.10 (-0.62%).

Today’s sugar prices reflected a downward trend, hitting a four-month low in New York and a nearly three-year low in London. Over the past three months, a more favorable sugar supply outlook has influenced these declines. On November 21, the International Sugar Organization (ISO) lowered its 2024/25 global sugar deficit projection to -2.51 million metric tons (MMT), down from an August forecast of -3.58 MMT. Additionally, the ISO raised its estimate for a global sugar surplus in 2023/24 to 1.31 MMT from a previous projection of +200,000 metric tons.

On December 19, India’s Food Secretary, Chopra, indicated that the country might permit sugar exports if a surplus materializes after domestic ethanol blending needs are fulfilled. The Indian government currently estimates a sugar surplus of around 1 MMT this season.

In Thailand, expectations for increased sugar production are leading to bearish sentiment in sugar prices. On October 29, Thailand’s Office of the Cane and Sugar Board projected that sugar output for 2024/25 would rise by 18% year-over-year to reach 10.35 MMT, compared to 8.77 MMT produced in the 2023/24 season.

Last Thursday, sugar prices saw a temporary increase to three-week highs due to indications of reduced sugar production in India, the world’s second-largest producer. The Indian Sugar and Bio-energy Manufacturers Association (ISM) reported a year-over-year decline of 15.5% in sugar production for the 2024/25 timeframe, estimating it at 9.54 MMT from October 1 to December 31. This dip in sugar output could lead the government to maintain export restrictions, putting further constraints on global supplies.

Brazil’s sugar industry faced challenges last year, including drought and heat that spurred fires in the important sugar-producing state of Sao Paulo. The industry group Orplana reported that nearly 2,000 fire incidents impacted around 80,000 hectares of sugarcane. As a result, Green Pool Commodity Specialists estimated a loss of up to 5 MMT of sugarcane. Brazil’s Conab also revised its 2024/25 sugar production estimate down from 46 MMT to 44 MMT due to lower yields stemming from these adverse weather conditions. As of December 27, Unica reported a year-over-year decline in cumulative sugar output for the 2024/25 season, totaling 39.711 MMT, with only 129 mills operating in the first half of December compared to 185 the previous year.

On a positive note for sugar prices, India’s Food Ministry lifted restrictions on sugar mills’ ethanol production for the 2024/25 year, starting in November, which could extend the country’s sugar export limits. In late 2023, India had ordered mills to halt sugarcane use for ethanol production aimed at bolstering sugar reserves. Since October 2023, sugar exports have been restricted in India to ensure adequate domestic supplies. During the 2022/23 season, India allowed only 6.1 MMT of sugar to be exported, a significant decrease from a record 11.1 MMT the previous season. However, the ISM suggested that India may have 2 MMT of sugar available for export in the upcoming season and called for the government to lift existing export restrictions.

On September 26, the ISM projected that India’s 2024/25 sugar production would decrease by 2% year-over-year to approximately 33.3 MMT, and that sugar reserves as of September 30 would be around 8.4 MMT, a decline from an earlier estimate of 9.1 MMT in May. Moreover, the National Federation of India Cooperative Sugar Factories Ltd reported a significant 18% year-on-year drop in sugar production from October 1 to December 15, totaling 6.1 MMT.

Providing further insight, the ISO forecasted a global sugar production for 2024/25 at 179.3 MMT, marking a 1.1% decline from 181.3 MMT in 2023/24. In its bi-annual report released on November 21, the USDA projected a 1.5% increase in global sugar production to a record 186.619 MMT for 2024/25, alongside a 1.2% rise in human sugar consumption, also reaching an all-time high of 179.63 MMT. The USDA also estimated that global sugar ending stocks would fall by 6.1% year-over-year to 45.427 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 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.