Sugar Prices Rise Amid Market Shifts and Production Changes

March NY world sugar #11 (SBH25) has increased by +0.37 (+2.05%), while March London ICE white sugar #5 (SWH25) is up by +12.20 (+2.58%).

Market Dynamics Fueled by Currency Movements

Today’s rise in sugar prices can be attributed to a weaker dollar (DXY00), which prompted short covering in sugar futures. Notably, funds in London sugar hold excessive short positions, potentially leading to a short-covering rally. According to last Friday’s weekly Commitment of Traders (COT) report, funds have increased their net-short position in London sugar by 2,322 contracts, reaching a five-year high of 2,515 net short positions.

Recent Price Trends in Sugar Markets

On Wednesday, NY sugar hit its lowest nearest-futures price in 4-3/4 months, while London sugar reached a 3-1/3 year low. This decline in sugar prices over the past three months reflects an improved outlook for sugar supply. The International Sugar Organization (ISO) revised its 2024/25 global sugar deficit forecast to -2.51 MMT from an earlier estimate of -3.58 MMT in August. Furthermore, the ISO raised its global sugar surplus estimate for 2023/24 to 1.31 MMT, a significant increase from the previous projection of 200,000 MT.

India’s Potential Sugar Export Moves

On December 19, India’s Food Secretary, Chopra, indicated that sugar exports may resume if a surplus is confirmed, following the fulfillment of domestic ethanol blending requirements. The government currently estimates a sugar surplus of approximately 1 MMT this season.

Anticipated Sugar Production in Thailand

A bullish outlook for sugar prices faces challenges from anticipated increases in sugar production in Thailand. On October 29, the Office of the Cane and Sugar Board projected a yearly production rise of +18% for 2024/25, bringing output to 10.35 MMT, up from 8.77 MMT in the 2023/24 season. As the world’s third-largest sugar producer and second-largest exporter, Thailand’s output can significantly influence the global market.

Support from Declining Production in India

India’s sugar production, the second largest globally, is facing setbacks. The Indian Sugar and Bio-energy Manufacturers Association (ISM) reported a -15.5% decrease in sugar production for the October to December 2024/25 period, totaling 9.54 MMT compared to the previous year. Consequently, the government may decide to maintain export restrictions, impacting global sugar supply.

Impact of Environmental Factors in Brazil

Brazil’s sugar crop suffered due to drought and intense heat last year, which triggered widespread fires in São Paulo, the country’s top sugar-producing area. The cane industry group Orplana reported 2,000 fire incidents affecting 80,000 hectares of sugarcane. Analysts from Green Pool Commodity Specialists estimate that approximately 5 MMT of sugarcane was lost. In response, Brazil’s government crop forecasting agency, Conab, downgraded its 2024/25 sugar production estimate to 44 MMT, down from 46 MMT, due to lower expected yields.

Policy Changes in India Affect Exports

On August 30, India’s Food Ministry lifted restrictions on sugar mills producing ethanol for the upcoming 2024/25 year, which could prolong the country’s export limitations. Since October 2023, India restricted sugar exports to ensure robust domestic supplies, allowing only 6.1 MMT to be exported in the 2022/23 season—well below the record 11.1 MMT from the previous year. However, an October 3 statement from ISM suggested India would have an exportable surplus of 2 MMT and urged the government to reconsider the current restrictions.

Global Sugar Production Trends

The ISOs forecast on August 30 indicated a global sugar production decrease for 2024/25, predicting an output of 179.3 MMT, a drop of -1.1% from 181.3 MMT in 2023/24. In contrast, the USDA’s bi-annual report released on November 21 projected a rise in global sugar production to a record 186.619 MMT for 2024/25, alongside a +1.2% increase in human sugar consumption to 179.63 MMT. The USDA also noted a projected decline in global sugar ending stocks by -6.1%, reaching 45.427 MMT by the end of that 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.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.