Sugar Prices Experience Mixed Movements Amid Market Dynamics
Current Price Trends and Market Influencers
March NY world sugar #11 (SBH25) today is up +0.09 (+0.47%), and March London ICE white sugar #5 (SWH25) is up +5.30 (+1.05%).
Rally Driven by Brazilian Real and Futures Short Covering
Today’s sugar prices are moderately higher but still below Monday’s three-week peak levels. A rise in the Brazilian real (^USDBRL) to a two-month high has spurred short covering in sugar futures, as a stronger real discourages Brazilian producers from selling their sugar exports.
Commodity Funds’ Positioning and Recent Data
An excessive short position held by commodity funds has fueled the current short-covering rally. According to last Friday’s Commitment of Traders (COT) report, these funds increased their net-short NY sugar position by 33,828 contracts to reach a five-year high of 139,873 net short positions for the week ending January 21. Similarly, their net-short London sugar positions grew by 6,566 to a five-year high of 18,708 positions during the same period.
Recent Price Declines and Global Supply Factors
Last Tuesday, sugar prices continued their prolonged decline, with NY sugar noting a five-and-a-quarter month low and London sugar marking a three-and-a-third year low. A favorable global sugar supply outlook pressures sugar prices downward. For instance, India announced last Monday that it would allow sugar mills to export 1 million metric tons (MMT) of sugar this season, easing earlier restrictions imposed in 2023 to ensure domestic supply. In the 2022/23 season, India only permitted mills to export 6.1 MMT after allowing a record 11.1 MMT the previous season.
ISO Adjusts Global Sugar Forecasts
On November 21, the International Sugar Organization (ISO) revised its forecast for the 2024/25 global sugar deficit to -2.51 MMT, an improvement from the August forecast of -3.58 MMT. Additionally, the ISO raised its 2023/24 global sugar surplus estimate to 1.31 MMT from 200,000 MT previously.
Thailand’s Sugar Production Projections
The anticipated increase in sugar production in Thailand casts a bearish outlook on sugar prices. On October 29, Thailand’s Office of the Cane and Sugar Board forecasted a significant 18% year-over-year rise in 2024/25 sugar production, predicting it would reach 10.35 MMT. This comes after Thailand produced 8.77 MMT in the 2023/24 season, maintaining its status as the world’s third-largest sugar producer and second-largest exporter.
India’s Sugar Production Decline
Conversely, sugar production in India, the second-largest producer globally, is projected to decrease. The Indian Sugar and Bio-energy Manufacturers Association (ISM) reported on January 9 that sugar production from October 1 to December 31 dropped by 15.5% year-on-year to 9.54 MMT. The ISM also expects India’s 2024/25 production to fall by 13.8% year-on-year, resulting in a five-year low of 27.6 MMT.
Challenges Faced by Brazilian Sugar Producers
Last year’s drought and extreme heat in Brazil caused widespread fires that damaged extensive sugar crops in the state’s primary growing region of Sao Paulo. The sugar cane industry group, Orplana, reported that up to 2,000 fire outbreaks influenced around 80,000 hectares of sugarcane. Green Pool Commodity Specialists indicated that approximately 5 MMT of sugar cane was lost due to these incidents. Consequently, Brazil’s government crop forecasting agency, Conab, adjusted its 2024/25 sugar production estimate down from 46 MMT to 44 MMT due to reduced sugarcane yields from the effects of drought and heat. As of today, Unica reported a cumulative 5.5% year-over-year decline in Center-South sugar output for the 2024/25 season, totaling 39.794 MMT.
Global Sugar Production Forecasts from USDA
Supporting sugar price strength, the ISO on August 30 predicted a 1.1% year-over-year decline in global sugar production for 2024/25, estimating it would total 179.3 MMT, down from 181.3 MMT the previous season.
The USDA, in its bi-annual report released on November 21, projected global sugar production for 2024/25 would increase by 1.5% year-over-year, reaching a record 186.619 MMT. Additionally, the USDA forecasts global sugar consumption will also rise by 1.2% year-over-year, totaling 179.63 MMT, while ending stocks are expected to decline by 6.1% year-over-year 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.
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