March Sugar Prices Climb Amid Mixed Market Signals
Brazil’s Currency Boosts Sugar Futures
March NY world sugar #11 (SBH25) closed up +0.14 (+0.72%) on Monday, while March London ICE white sugar #5 (SWH25) saw a rise of +1.70 (+0.33%).
Moderate gains in sugar prices were observed on Monday, driven primarily by the strength of the Brazilian real (^USDBRL). The currency increased by +0.44%, nearing last week’s 2-3/4 month high against the dollar. Over the past three weeks, a stronger real has led to fund short-covering in sugar, propelling prices to a 7-week high last Thursday. This boost in the real dampens the likelihood of export sales from Brazil’s sugar producers.
India’s Production Decline Offers Some Support
Support for sugar prices also came from a report by Centrum, indicating India’s sugar production for the 2024/25 season (from October 1 to January 31) is projected to decrease by -12.2% year-on-year to 16.5 million metric tons (MMT).
Future Surplus Expected
However, there are negative signs ahead. Green Pool Commodity Specialists forecasted a shift to a global sugar surplus of +2.7 MMT in the 2025/26 crop year, contrasting with a deficit of -3.7 MMT for the 2024/25 year.
The sugar market has been facing a downtrend for four months. On January 21, NY sugar hit a nearest-futures low not seen in 5-3/4 months, while London sugar reached a 3-1/2 year low. An improving global sugar supply is contributing to downward pressure on prices. Notably, on January 20, the Indian government announced it would permit sugar mills to export 1 MMT of sugar this season, relaxing some of the tighter export restrictions that were put in place in 2023. During the 2022/23 season, exports were limited to only 6.1 MMT compared to a record 11.1 MMT the previous year.
International Sugar Organization Updates Forecasts
On November 21, the International Sugar Organization (ISO) revised its forecast, reducing the anticipated 2024/25 global sugar deficit to -2.51 MMT from an earlier estimate of -3.58 MMT. The ISO also updated its global sugar surplus estimate for 2023/24 to 1.31 MMT, an improvement from the previous August forecast of 200,000 MT.
Bears Lurking: Increased Output from Thailand
The production outlook in Thailand appears bearish for sugar prices as well. On October 29, the Office of the Cane and Sugar Board estimated a notable +18% year-on-year increase in sugar output for the 2024/25 season to reach 10.35 MMT, up from 8.77 MMT produced in 2023/24.
Impact of Drought and Production Cuts in Brazil
Certain factors have provided support for sugar as production estimates have been cut. For instance, a recent drought and extreme heat caused significant crop damage in Brazil’s top producing state of São Paulo. Reports indicate around 2,000 fires affected approximately 80,000 hectares of sugarcane, leading to a loss of roughly 5 MMT of sugarcane, according to Green Pool Commodity Specialists. Brazil’s government crop forecasting agency, Conab, adjusted its 2024/25 sugar production estimate downward from 46 MMT to 44 MMT, attributing the change to lower sugarcane yields. Moreover, UNICA reported that cumulative sugar output in Brazil’s Center-South region through mid-January was down -5.5% year-on-year, totaling 39.794 MMT.
Outlook Remains Uncertain
Meanwhile, India, the world’s second-largest sugar producer, is also expected to see smaller production figures. The India Sugar Mills Association (ISMA) projects a drop of -15% year-on-year to a five-year low of 27.27 MMT for the 2024/25 sugar production.
Lastly, the USDA’s bi-annual report released on November 21 highlighted an optimistic rise in global sugar production, predicting a +1.5% increase for 2024/25 to a record 186.619 MMT, while also projecting that human sugar consumption will see a similar rise of +1.2% y/y to reach 179.63 MMT. Global sugar ending stocks are expected to decline by -6.1% y/y 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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