Sugar Prices Experience Mixed Movements Amid Market Shifts

May NY world sugar #11 (SBK25) closed Wednesday at +0.10 (+0.55%), while May London ICE white sugar #5 (SWK25) ended up +4.00 (+0.77%).

Market Dynamics: Price Movements and Trends

On Wednesday, sugar prices saw moderate gains as the dollar index (DXY00) dropped to a 3-3/4 month low, prompting short-covering in sugar futures. However, these gains remained limited following a significant plunge in WTI crude oil (CLJ25), which fell more than -3% to a 1-3/4 year low. Lower crude oil prices are expected to affect ethanol costs, potentially leading global sugar mills to redirect cane crushing toward increased sugar production, thereby elevating sugar supplies.

Demand Concerns and Historical Context

Earlier in the week, sugar prices fell to 3-week lows fueled by demand concerns. Sugar traders Wilmar International Ltd and Sucres et Denrees SA took delivery of a record 1.7 million metric tons (MMT) of raw sugar against the recently expired March NY futures contract. Large deliveries often indicate a bearish outlook, suggesting that sellers are struggling to find other markets.

Following a forecast from sugar trader Czarnikow, sugar prices remained under pressure. Czarnikow projected Brazil’s sugar production for the 2025/26 season to reach a record 43.6 MMT, asserting that producing sugar offers better profitability compared to ethanol.

Global Supply Landscape Shifts

Meanwhile, the International Sugar Organization (ISO) recently revised its global sugar deficit forecast for 2024/25 to -4.88 MMT, an increase from -2.51 MMT in November. This indicates a tightening market, in contrast to the 2023/24 global sugar surplus of 1.31 MMT. The ISO also reduced its global sugar production forecast for 2024/25 to 175.5 MMT from the previous estimate of 179.1 MMT. In contrast, Green Pool Commodity Specialists predicted a shift toward a surplus of +2.7 MMT in the 2025/26 crop year, reversing the projected deficit of -3.7 MMT in 2024/25.

Earlier in the week, sugar prices reached a 2-3/4 month high, continuing an upward trend that began in mid-January. The Brazilian real (^USDBRL) appreciated against the dollar from mid-December to mid-February, inhibiting export selling from Brazilian sugar producers and resulting in significant fund short-covering in sugar futures.

Regional Production Insights: India and Thailand

Support for sugar prices has emerged from recent reports indicating that India’s sugar production declined -14% year-on-year to 21.98 MMT for the marketing year-to-date, ending February 28. The decline was noted by the India Sugar and Bio-Energy Manufacturers Association.

On a bearish note, the Indian government announced a plan on January 20 to permit sugar mills to export 1 MMT of sugar this season, easing restrictions implemented in 2023 to ensure sufficient domestic supply. In the last season, India exported a mere 6.1 MMT of sugar after a record 11.1 MMT the previous season. The India Sugar Mills Association (ISMA) further forecasts a -15% year-over-year decrease in India’s sugar production for 2024/25, reaching a five-year low of 27.27 MMT.

In Thailand, the production outlook looks bearish for prices as the Office of the Cane and Sugar Board expects production for 2024/25 to increase by +18% year-on-year to 10.35 MMT, up from 8.77 MMT in the 2023/24 season. Thailand stands as the world’s third-largest sugar producer and the second-largest exporter.

Challenges Impacting Brazil’s Production

Brazil’s sugar crops faced adverse conditions last year due to drought and excessive heat, which led to fires in the top sugar-producing state of Sao Paulo. Green Pool Commodity Specialists estimate that up to 5 MMT of sugar cane may have been lost. Subsequently, Conab, Brazil’s government crop forecasting agency, reduced its sugar production estimate for 2024/25 from 46 MMT to 44 MMT, citing lower yields caused by these unfavorable conditions. As of mid-February, Unica reported a -5.6% year-over-year drop in cumulative sugar output from Brazil’s Center-South region, totaling 39.812 MMT.

Global Production and Consumption Forecasts

The USDA’s bi-annual report released on November 21 anticipates global sugar production for 2024/25 to climb by +1.5% year-on-year to a record 186.619 MMT, while human sugar consumption is expected to rise by +1.2% year-on-year to a new high of 179.63 MMT. The USDA also projects a -6.1% decrease in global sugar ending stocks for 2024/25, expected to drop to 45.427 MMT.

On the date of publication, Rich Asplund did not hold any positions in the securities mentioned in this article. All information in this article is for informational purposes only. For more details, please review the Barchart Disclosure Policy
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