Global Sugar Prices Face Pressure Amidst Variable Supply Dynamics
March NY world sugar #11 (SBH25) closed down -0.19 (-1.03%) on Friday, while March London ICE white sugar #5 (SWH25) fell -6.40 (-1.32%).
Recent Decline in Sugar Prices
Sugar prices experienced moderate losses on Friday, remaining just above notable lows reached earlier in the week. Over the last three months, prices have generally decreased due to a more favorable supply outlook. On Wednesday, NY sugar hit a 4-3/4 month low for nearest futures, and London sugar fell to a 3-1/3 year low. The International Sugar Organization (ISO) revised its 2024/25 global sugar deficit forecast down to -2.51 million metric tons (MMT) from an August estimate of -3.58 MMT. Conversely, it anticipated a surplus of 1.31 MMT for the 2023/24 season, up from a previous projection of 200,000 metric tons.
India’s Sugar Export Prospects
On December 19, India’s Food Secretary, Chopra, indicated that sugar exports may be permitted if there is a surplus after meeting domestic ethanol blending requirements. Currently, the Indian government estimates a sugar surplus of around 1 MMT for this season.
Thailand’s Production Increase Affects Market
A projected rise in sugar production in Thailand contributes to a bearish outlook for prices. The Office of the Cane and Sugar Board in Thailand forecasted a year-over-year increase of 18%, anticipating production to reach 10.35 MMT for the 2024/25 season, following an output of 8.77 MMT in 2023/24.
Short Positions in London Sugar Markets
A significant short position held by funds in the London sugar market could trigger a short-covering rally. Last week’s Commitment of Traders (COT) report revealed a rise of 2,322 in net-short positions, pushing the total to a five-year high of 2,515.
Supply Concerns from India and Brazil
Production concerns in India, the second-largest global sugar producer, could support prices. The Indian Sugar and Bio-energy Manufacturers Association (ISM) reported a 15.5% year-over-year drop in sugar production for the 2024/25 season, estimating output at 9.54 MMT for the period between October 1 and December 31. This decline might compel the Indian government to maintain export restrictions, impacting global sugar supply.
Brazil has faced challenges as last year’s drought and excessive heat led to fires damaging crops in the largest sugar-producing region, Sao Paulo. The sugar cane industry group, Orplana, reported that approximately 2,000 fire outbreaks affected 80,000 hectares of sugarcane. Analysts at Green Pool Commodity Specialists noted that the fires could have resulted in the loss of up to 5 MMT of sugar cane. In light of these circumstances, Brazil’s government crop forecasting agency, Conab, downgraded its sugar production estimate for 2024/25 from 46 MMT to 44 MMT due to lower yields.
India’s Ethanol Policy and Future Outlook
Supporting sugar prices, India’s Food Ministry lifted restrictions on sugar mills producing ethanol for the 2024/25 year beginning in November, potentially extending its sugar export curbs. As of late 2023, India curtailed sugar mills from converting sugarcane into ethanol for the 2023/24 season to bolster its sugar reserves. During the 2022/23 season, India allowed a mere 6.1 MMT of sugar exports, down from a record 11.1 MMT in the previous season. On October 3, the ISM noted India would have 2 MMT available for export in the upcoming season and called on the government to reconsider export restrictions.
Production Projections and Global Consumption
The ISM projected a slight decline in India’s 2024/25 sugar production, estimating it will fall 2% year-over-year to 33.3 MMT. They also expect India’s sugar reserves to sit at 8.4 MMT by September 30, lower than a May projection of 9.1 MMT.
Additionally, the ISO forecasts 2024/25 global sugar production to reach 179.3 MMT, reflecting a decrease of 1.1% from the 181.3 MMT projected for the current season. However, the USDA’s bi-annual report released on November 21 foresees a 1.5% increase in global sugar production, expecting it to hit a record 186.619 MMT for 2024/25, alongside a 1.2% growth in human sugar consumption, which is projected to reach 179.63 MMT. The USDA also predicts global sugar ending stocks to decline by 6.1% to 45.427 MMT.
At the time of publication,
Rich Asplund
did not hold any positions in the securities discussed in this article. All information herein is presented for informational purposes. Please refer to the Barchart Disclosure Policy
here.
The opinions expressed in this article are solely those of the author and do not necessarily reflect the views of Nasdaq, Inc.
