Sugar Prices Decline Following Two-Week Highs Amid Supply Signals
On Monday, July NY world sugar #11 (SBN25) closed down -0.08 (-0.45%), while August London ICE white sugar #5 (SWQ25) decreased by -4.90 (-0.98%).
Market Movements
Sugar prices initially rose due to a more than 1% rally in WTI crude oil (CLM25), reaching a two-week high. Higher crude prices can benefit ethanol, leading sugar mills to divert cane crushing toward ethanol production, potentially reducing sugar supplies. However, prices retreated after the dollar index (DXY00) reached a one-month high.
Production Forecasts and Historical Context
On May 2, July NY sugar reached a 3¾-year nearest-futures low, and the previous Wednesday saw London sugar fall to a 3¾-month low, largely due to expectations of increased sugar production in Brazil. Unica reported on April 30 that Brazil’s Center-South sugar production increased by 1.3% year-over-year to 731,000 metric tons in early April. This was part of the first report for the 2025/26 season.
Additionally, on April 29, Conab projected Brazil’s 2025/26 sugar production to rise by 4.0% year-over-year to 45.875 million metric tons.
Global Sugar Production Trends
Global signs of increased sugar output have negative implications for prices. On the previous Tuesday, the USDA’s Foreign Agricultural Service (FAS) estimated India’s 2025/26 sugar production would surge by 26% year-over-year to 35 million metric tons, attributing this to favorable monsoon rains and expanded sugar acreage.
On April 23, the USDA’s FAS also predicted Brazil’s sugar production in 2025/26 would increase by 2.3% year-over-year to 44.7 million metric tons, up from 43.7 million metric tons in the previous season.
India’s Monsoon Impact
The forecast for an abundant monsoon in India threatens to undermine sugar prices. On April 15, India’s Ministry of Earth Sciences projected rainfall this year would be 105% of the long-term average, which is crucial for the upcoming growing season, running from June through September.
Export Regulations and Their Effects
In another bearish indicator, the Indian government announced on January 20 an allowance for its sugar mills to export 1 million metric tons this season, easing restrictions that have been in place since October 2023. Last season, India limited sugar exports to 6.1 million metric tons after a record 11.1 million metric tons were exported in the previous season. Nonetheless, the Indian Sugar Mills Association (ISMA) indicates a predicted 17.5% year-over-year decline in India’s 2024/25 sugar production, potentially hitting a five-year low of 26.4 million metric tons. Reported figures from ISMA show production from October 1 to April 15 was 25.5 million metric tons, an 18% decrease from the same period last year.
Indian Food Secretary Chopra noted on May 1 that exports for 2024/25 may be capped at 800,000 metric tons, which is below prior estimates of 1 million metric tons.
Thailand’s Sugar Production Outlook
Increasing sugar production in Thailand also adds downward pressure on prices. On May 2, Thailand’s Office of the Cane and Sugar Board reported a 14% year-over-year increase to 10 million metric tons in sugar production for the 2024/25 season. Thailand is currently the third-largest sugar producer and the second-largest exporter globally.
Counteracting Signals
Despite bearish factors, some indicators suggest reduced global sugar production could support prices. According to Unica on April 14, Brazil’s Center-South sugar output through March fell 5.3% year-over-year to 40.169 million metric tons. Furthermore, the Indian Sugar and Bio-energy Manufacturers Association revised India’s production forecast down to 26.4 million metric tons from an earlier estimate of 27.27 million metric tons, citing declining cane yields.
Global Supply Forecasts
Meanwhile, the International Sugar Organization (ISO) projected on March 6 a global sugar deficit for the 2024/25 season, increasing its forecast from a shortfall of 2.51 million metric tons to 4.88 million metric tons, suggesting a tightening market compared to the 1.31 million metric tons surplus in 2023/24. The ISO also revised its global production forecast down to 175.5 million metric tons, from 179.1 million metric tons previously.
Last year’s drought and excessive heat caused significant damage to sugar crops in Brazil, particularly in São Paulo, the country’s top sugar-producing state. Green Pool Commodity Specialists estimated that as much as 5 million metric tons of sugar cane may have been lost due to fires. In light of these factors, Conab now expects Brazil’s sugar production in 2024/25 to decline by 3.4% year-over-year to 44.118 million metric tons, further attributing this decrease to lower yields from adverse weather.
The USDA, in its bi-annual report released on November 21, projected global sugar production would increase by 1.5% year-over-year to a record 186.619 million metric tons for the 2024/25 season, with human sugar consumption rising by 1.2% to reach 179.63 million metric tons. The USDA also forecasted that global sugar ending stocks would fall by 6.1% year-over-year to 45.427 million metric tons.
On the date of publication, Rich Asplund did not hold (either directly or indirectly) any positions in the securities mentioned in this article. All information and data presented are for informational purposes only. For more information, please view the Barchart Disclosure Policy.
The views and opinions expressed herein are those of the author and do not necessarily represent those of Nasdaq, Inc.
