Sugar Prices Decline Amid Global Market Shifts
Increased dollar strength and shifting production forecasts impact sugar market.
March NY world sugar #11 (SBH25) closed down -0.12 (-0.62%) on Friday, while March London ICE white sugar #5 (SWH25) fell by -3.20 (-0.61%).
On Friday, sugar prices experienced moderate declines, influenced by a rally in the dollar index (DXY00) that reached a one-week high. This uplift in the dollar weighed on several commodities, including sugar. Earlier in the week, prices had risen, supported by a stronger Brazilian real (^USDBRL) that encouraged traders to cover short positions in sugar futures. The real reached a two-month peak against the dollar, making it less attractive for Brazil’s sugar producers to sell exports.
Support for sugar prices emerged after Czarnikow revised its estimate for Thailand’s 2024/25 sugar production, reducing it to 10.8 MMT from a previous forecast of 11.6 MMT. Additionally, the high level of short positions by commodity funds in sugar futures could lead to a potential short-covering rally. The latest weekly Commitment of Traders (COT) report indicated that funds increased their net-short NY sugar position by 33,828 to 139,873, a five-year high. Similarly, the net-short position for London sugar rose by 6,566 to 18,708, also a five-year peak.
Last Tuesday marked a continuation of a four-month sell-off in sugar prices. NY sugar reached a 5-1/4 month low, while London sugar hit a 3-1/3 year low. Contributing to the downward trend was an improved global sugar supply outlook. Last Monday, India announced it would permit its sugar mills to export 1 MMT of sugar this season, easing restrictions that had been in place since October 2023 to maintain domestic supply levels. For the 2022/23 season, India only allowed 6.1 MMT of sugar exports after a higher figure of 11.1 MMT in the previous season.
On November 21, the International Sugar Organization (ISO) adjusted its global sugar deficit forecast for 2024/25 to -2.51 MMT from an earlier projection of -3.58 MMT. The ISO also raised its 2023/24 global sugar surplus estimate to 1.31 MMT from an August figure of 200,000 MT.
Thailand’s forecast of increased sugar production adds a bearish note to the market. As of October 29, the Office of the Cane and Sugar Board estimated Thailand’s sugar production for 2024/25 would rise by 18% year-on-year to 10.35 MMT, following a production of 8.77 MMT for the 2023/24 season.
In contrast, India, the world’s second-largest sugar producer, is experiencing reduced production. The Indian Sugar and Bio-energy Manufacturers Association (ISM) reported on January 9 that sugar production for India is down 15.5% year-on-year to 9.54 MMT in the October to December period. Forecasts suggest a further 15% decline for the 2024/25 season, potentially hitting a five-year low of 27.27 MMT.
The Brazilian sugar industry also faces challenges. Drought and extreme heat led to wildfires that damaged crops in São Paulo, Brazil’s leading sugar-producing state. Orplana, a sugar cane industry group, reported that up to 80,000 hectares of sugarcane were affected by around 2,000 fire outbreaks. Green Pool Commodity Specialists estimate that these fires may have led to a loss of up to 5 MMT of sugar cane. Consequently, Brazil’s government crop forecasting agency, Conab, revised its 2024/25 sugar production estimate downward from 46 MMT to 44 MMT due to lower yields from these adverse conditions. As of mid-January, cumulative sugar output in Brazil’s Center-South was down 5.5% year-on-year at 39.794 MMT, according to Unica.
Despite these challenges, some supportive signals for sugar prices remain. The ISO, on August 30, predicted a slight reduction in global sugar production for 2024/25, estimating it at 179.3 MMT, down 1.1% from 181.3 MMT in 2023/24.
The USDA, in its bi-annual report released November 21, projected a global increase in sugar production for 2024/25, estimating a 1.5% rise to a record 186.619 MMT. They also predicted a 1.2% increase in human sugar consumption, reaching a record of 179.63 MMT, with ending stocks expected to decline by 6.1% year-on-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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