Mixed Signals in the Sugar Market: Price Movements Spark Concern and Hope
March NY world sugar #11 (SBH25) is down -0.05 (-0.25%), while March London ICE white sugar #5 (SWH25) is up +14.10 (+2.65%).
Market Overview: A Blend of Gains and Losses
Today’s sugar prices show a mixed picture, with London sugar reaching a 1-1/2 week high. NY sugar prices fell due to India’s projection of a significant sugar crop for the 2025/26 season, which could enhance its export capacity. Conversely, London’s sugar futures received a boost from fund short-covering, especially with the final trading day for March contracts approaching this Thursday.
The Impact of Currency Strength on Market Trends
In recent weeks, the Brazilian real (^USDBRL) has strengthened, prompting fund short-covering and pushing sugar prices to a 7-week high last Thursday. The real hit a 2-3/4 month peak last Friday, reducing export selling pressures for Brazil’s sugar producers. Additionally, support for sugar prices came from a report last Tuesday indicating that India’s sugar production from October 1 to January 31 for the 2024/25 season fell by -12.2% year-over-year to 16.5 MMT.
Concerns: A Surplus on the Horizon
On a concerning note, Green Pool Commodity Specialists predicted last Wednesday that the global sugar market would transition to a surplus of +2.7 MMT in the 2025/26 crop year, reversing the previous year’s deficit of -3.7 MMT. Sugar prices have been in a downtrend for four months. On January 21, NY sugar hit its lowest level in about 5-3/4 months, while London sugar reached a 3-1/2 year low. The improving global supply outlook has weighed heavily on sugar prices, particularly after India announced it would permit sugar mills to export 1 MMT this season, easing prior restrictions set in 2023. Last season, India allowed only 6.1 MMT of sugar exports compared to a record 11.1 MMT the year before.
International Predictions on Sugar Production
On November 21, the International Sugar Organization (ISO) lowered its global sugar deficit forecast for the 2024/25 season to -2.51 MMT, an improvement from the August forecast of -3.58 MMT. Furthermore, the ISO raised its global sugar surplus estimate for the 2023/24 season to 1.31 MMT, up from 200,000 MT previously projected.
Thailand’s Production Forecast and Its Effects on Prices
The outlook for Thailand’s sugar production is expected to add downward pressure on prices. On October 29, Thailand’s Office of the Cane and Sugar Board estimated a remarkable +18% yearly increase in production for the 2024/25 season, totaling 10.35 MMT. In the previous season (2023/24), Thailand produced 8.77 MMT and is recognized as the world’s third-largest sugar producer and second-largest exporter.
Weather-Related Losses and Their Impact on Crops
Sugar prices received support after Czarnikow revised its 2024/25 sugar production estimate for Thailand down to 10.8 MMT from a previous figure of 11.6 MMT. In Brazil, drought and extreme heat led to devastating fires last year, damaging large portions of sugar crops in São Paulo, the country’s main producing area. Reports indicated about 2,000 fire incidents affected up to 80,000 hectares of planted sugarcane, with Green Pool noting potential losses of up to 5 MMT of sugarcane. Brazil’s government crop forecasting agency, Conab, adjusted its 2024/25 sugar production estimate downward to 44 MMT from a former estimate of 46 MMT, citing declining yields due to the adverse weather conditions.
India’s Production Decline and Global Forecasts
Signs of reduced sugar production in India, the second-largest producer globally, are also providing support for sugar prices. The India Sugar Mills Association (ISMA) anticipates a -15% drop to a 5-year low of 27.27 MMT for the 2024/25 sugar production. Meanwhile, the ISO’s August 30 report projected global sugar production to reach 179.3 MMT for 2024/25, reflecting a -1.1% decline from 181.3 MMT in 2023/24.
USDA Predictions Indicate Rising Production and Consumption
In its bi-annual report released November 21, the USDA forecasted a +1.5% increase in global sugar production for 2024/25, reaching a record 186.619 MMT. Global human sugar consumption is also expected to rise by +1.2% year-over-year, achieving a record of 179.63 MMT. The USDA estimates that global sugar ending stocks will decline by -6.1% to 45.427 MMT.
On the date of publication, Rich Asplund did not hold (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article are provided solely for informational purposes. For more details, please view the Barchart Disclosure Policy here.
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