Sugar Prices Experience Moderate Gains Amid Market Fluctuations

Today, May NY world sugar #11 (SBK25) has increased by +0.11 (+0.61%), while May London ICE white sugar #5 (SWK25) is up +4.30 (+0.83%). Sugar prices show moderate rises as short-covering in futures occurs, following a significant drop in the dollar index (DXY00), which fell more than -1% to a 3-3/4 month low. However, gains in sugar are restricted as WTI crude oil (CLJ25) tumbles to a 1-3/4 year low. Weaker crude oil prices may lower ethanol prices, potentially causing sugar mills to shift their focus from ethanol production to sugar production, thus increasing sugar supplies.

Recent Trends Impacting Sugar Prices

On Tuesday, sugar prices sank to 3-week lows due to demand concerns. Wilmar International Ltd and Sucres et Denrees SA, two significant sugar traders, reported record deliveries of 1.7 million metric tons (MMT) of raw sugar against the March NY futures contract that expired last Friday. Such large deliveries typically signal a bearish outlook for prices, suggesting that sellers have limited market options.

Prior to this drop, sugar prices faced pressure when Czarnikow projected that Brazil’s sugar production for the 2025/26 season could reach a record 43.6 MMT, driven by the higher profitability of sugar compared to ethanol.

Global Sugar Market Adjustments

The International Sugar Organization (ISO) has also adjusted its forecasts, raising its 2024/25 global sugar deficit estimate to -4.88 MMT from a previous estimate of -2.51 MMT and indicating an overall market tightening, down from the 2023/24 surplus of 1.31 MMT. Additionally, the ISO reduced its 2024/25 global sugar production forecast to 175.5 MMT from 179.1 MMT.

Conversely, Green Pool Commodity Specialists projected a rebound in the global sugar market, expecting it to shift to a surplus of +2.7 MMT in the 2025/26 crop year, contrasting with their earlier deficit forecast of -3.7 MMT for the 2024/25 season.

Last Tuesday saw sugar prices rise to a 2-3/4 month high, extending a robust rally that began in mid-January. The Brazilian real (^USDBRL) appreciated significantly against the dollar from mid-December to mid-February, discouraging export sales from Brazil’s sugar producers and leading to substantial short-covering in sugar futures.

Regional Production Challenges and Forecasts

Sugar prices received support from reports indicating that India’s sugar production has declined by -14% year-on-year to 21.98 MMT for the marketing year-to-date (October 1 through February 28), according to the India Sugar and Bio-Energy Manufacturers Association.

Nonetheless, the Indian government eased restrictions on sugar exports, allowing mills to export 1 MMT this season. Since October 2023, India has implemented tight restrictions to maintain domestic supply, with only 6.1 MMT of sugar exported in the 2022/23 season, down from a record 11.1 MMT the previous year. The India Sugar Mills Association (ISMA) forecasts a -15% year-on-year fall in India’s sugar production to a five-year low of 27.27 MMT for the 2024/25 season.

Thailand’s anticipated sugar production increase also poses a bearish influence on sugar prices. On October 29, Thailand’s Office of the Cane and Sugar Board projected that sugar production will rise by +18% year-on-year to 10.35 MMT, up from the 8.77 MMT produced in the 2023/24 season. Thailand is noted as the world’s third-largest sugar producer and the second-largest exporter.

In Brazil, drought and extreme heat have led to significant crop damage in Sao Paulo, the country’s primary sugar-producing state. Green Pool Commodity Specialists estimate that as much as 5 MMT of sugar cane may have perished due to these conditions. Following these events, Conab, Brazil’s government crop forecasting agency, reduced its 2024/25 sugar production estimate to 44 MMT, down from 46 MMT, due to lower sugarcane yields.

The USDA’s November 21 report predicted a +1.5% year-on-year increase in global sugar production for 2024/25, reaching a record 186.619 MMT. The report also anticipated a +1.2% increase in global human sugar consumption to a record 179.63 MMT and projected a -6.1% year-on-year decline in global sugar ending stocks 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 for informational purposes only. For more information, please view the Barchart Disclosure Policy here.

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