Sugar Prices Rise Amid Weaker Dollar and Production Predictions

July NY world sugar #11 (SBN25) increased by +0.09 (+0.52%), while August London ICE white sugar #5 (SWQ25) gained +7.50 (+1.53%).

Sugar prices have risen for the second consecutive session, driven by a weaker dollar (DXY00). This shift is leading to short-covering in sugar futures following last week’s sell-off.

Production Trends Impacting Prices

Last week, July NY sugar reached a nearest-futures low not seen in 3 years and 9 months, while London sugar fell to a 2-week low, attributed to expectations of higher sugar production in Brazil. A report from Unica revealed that Brazil Center-South sugar production for the first half of April rose +1.3% year-on-year to 731,000 MT. This report was the first for the 2025/26 season. Additionally, Conab projected Brazil’s 2025/26 sugar production would increase +4.0% year-on-year to 45.875 MMT.

Bloomberg reported that, last Thursday, Louis Dreyfus was the sole trader to deliver raw sugar for the NY May sugar futures that expired Wednesday. Approximately 1.5 MMT of sugar was delivered, marking the fifth-largest delivery for the contract in the past five years, according to StoneX. This large delivery points to weak demand in the sugar market.

Global Sugar Output Projections

Favorable conditions for sugar production in various regions are bearish for prices. The USDA’s Foreign Agricultural Service (FAS) anticipates India’s 2025/26 sugar production will rise +26% year-on-year to 35 MMT, boosted by favorable monsoon rains and increased sugar acreage. Earlier, the USDA’s FAS predicted Brazil’s sugar production would climb +2.3% year-on-year to 44.7 MMT for the 2025/26 season, up from 43.7 MMT in the previous season.

India’s Ministry of Earth Sciences has forecasted above-normal monsoon rainfall this year, at 105% of the long-term average. The monsoon season, which runs from June to September, is expected to lead to a bumper sugar crop.

Export and Production Dynamics

On a negative note, consultant Datagro projected on March 12 that Brazil’s Center-South sugar production would increase +6% year-on-year to 42.4 MMT. Additionally, Green Pool Commodity Specialists forecasted a shift in the worldwide sugar market to a surplus of +2.7 MMT for the 2025/26 crop year, a turnaround from the previous deficit of -3.7 MMT in 2024/25.

The Indian government announced on January 20 that it would allow sugar mills to export 1 MMT of sugar this season, easing previous export restrictions. India limited sugar exports since October 2023 to stabilize domestic supplies, allowing only 6.1 MMT during the 2022/23 season compared to a record 11.1 MMT in 2021/22. However, India’s Sugar Mills Association (ISMA) predicts that sugar production in India for the 2024/25 season will fall -17.5% year-on-year to a 5-year low of 26.4 MMT. The ISMA also reported that Indian sugar production from October 1 to April 15 was 25.5 MMT, an 18% decline from the previous year.

Thailand’s Production Outlook

In Thailand, sugar production for 2024/25 is projected to rise +14% year-on-year to 10.00 MMT, further contributing to the bearish sentiment for sugar prices. Thailand ranks as the world’s third-largest producer and second-largest exporter of sugar.

Market Adjustments and Global Trends

Conversely, indicators of lower global sugar production support prices. Unica reported a 5.3% year-on-year decline in Brazil’s Center-South sugar output through March, amounting to 40.169 MMT. Furthermore, the Indian Sugar and Bio-energy Manufacturers Association revised its forecast for India’s 2024/25 sugar production down to 26.4 MMT, citing reduced cane yields.

The International Sugar Organization (ISO) has upped its global sugar deficit forecast for 2024/25 to -4.88 MMT from a prior -2.51 MMT estimate, reflecting a tightening market compared to a 1.31 MMT surplus in 2023/24. The ISO also reduced its global sugar production estimate for 2024/25 to 175.5 MMT.

Recent Challenges in Sugar Production

Last year, drought and excessive heat led to fires that damaged sugar crops in Brazil’s key sugar-producing state of São Paulo. Green Pool Commodity Specialists noted a potential loss of 5 MMT of sugar cane due to these fires. Conab, Brazil’s government crop agency, recently projected a -3.4% year-on-year decline in sugar production for 2024/25 to 44.118 MMT, blaming lower sugarcane yields on adverse weather conditions.

The USDA’s bi-annual report, released on November 21, anticipates a +1.5% increase in global 2024/25 sugar production to a record 186.619 MMT. It also projects a +1.2% rise in global sugar consumption to 179.63 MMT, with a forecasted -6.1% decline in global ending stocks 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 is provided solely for informational purposes.
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The views expressed herein are solely those of the author and do not necessarily reflect the views of any associated entity.