Sugar Prices Surge As Global Production Estimates Shift
March NY world sugar #11 (SBH25) is up +0.22 (+1.14%), while March London ICE white sugar #5 (SWH25) has risen +11.30 (+2.214%).
London Sugar Reaches Six-Week High
Today, sugar prices are climbing, driven notably by London’s sugar reaching a six-week peak. Recent strength in the Brazilian real (^USDBRL) has contributed to this increase, prompting traders to cover short positions in sugar futures. The real surged to a two-month high against the dollar, discouraging Brazil’s sugar producers from making export sales.
Production Cuts Influence Market Sentiment
Further support for sugar prices emerged today when Czarnikow lowered its forecast for Thailand’s 2024/25 sugar production from 11.6 MMT to 10.8 MMT. This adjustment introduced an element of bullishness into the market.
Record Short Positions Fuel Rally
A large short position held by commodity funds is creating pressure for short-covering. Last Friday’s Commitment of Traders (COT) report revealed that funds increased their net-short position in NY sugar by 33,828 contracts over the week ending January 21, bringing it to a five-year high of 139,873. Simultaneously, the net-short position in London sugar rose by 6,566, also hitting a five-year high of 18,708 contracts.
Recent Price Declines Reflect Supply Issues
Last Tuesday, sugar prices extended a sell-off that lasted for over three months, with NY sugar reaching its lowest point in 5 1/4 months and London sugar reflecting a low not seen in over three years. The improved outlook for global sugar supply is contributing to this downward pressure. Just last Monday, India announced it would allow its sugar mills to export 1 MMT of sugar this season, easing restrictions placed on sugar exports since October 2023 to maintain domestic supply levels.
India’s Export History and Global Deficits
In 2022/23, India had allowed the export of only 6.1 MMT of sugar, a steep fall from a record 11.1 MMT exported in the previous season. On November 21, the International Sugar Organization (ISO) revised down its forecast for the global sugar deficit in 2024/25 to -2.51 MMT, an improvement from an earlier projection of -3.58 MMT. Additionally, the ISO adjusted its 2023/24 global sugar surplus estimate upward from 200,000 MT to 1.31 MMT.
Thailand’s Production Upswing and India’s Decline
The outlook for sugar production in Thailand appears bearish for sugar prices. The Office of the Cane and Sugar Board estimated a significant production increase of 18% year-over-year, projecting 10.35 MMT for 2024/25. In contrast, India, the second-largest sugar producer, is facing declines. The Indian Sugar and Bio-energy Manufacturers Association (ISM) reported a 15.5% decrease in sugar production from October to December, expecting a total of 27.6 MMT for 2024/25, a five-year low.
Brazil’s Struggles with Natural Disasters
Brazilian sugar production has also faced setbacks due to drought and excessive heat. The situation in Sao Paulo, the top sugar-producing state, saw around 2,000 fire outbreaks affecting 80,000 hectares of sugarcane. Green Pool Commodity Specialists estimate that as much as 5 MMT of sugarcane may have been lost to these fires. In response, Conab, Brazil’s government crop forecasting agency, reduced its 2024/25 sugar production estimate from 46 MMT to 44 MMT, citing lower yields.
Global Production Forecasts Shift
According to the ISO, global sugar production for 2024/25 is projected at 179.3 MMT, down 1.1% from 181.3 MMT in 2023/24. However, the USDA anticipates growth, projecting a 1.5% increase year-over-year to a record 186.619 MMT, with human consumption rising by 1.2% to 179.63 MMT and ending stocks expected to decrease by 6.1% 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 is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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