Sugar Prices Show Modest Gains Amid Mixed Global Production Outlook
Summary: Sugar futures saw slight increases on Tuesday, influenced by the Brazilian currency’s strength and differing production forecasts from major producers.
March NY world sugar #11 (SBH25) closed up +0.12 (+0.62%) on Tuesday, while March London ICE white sugar #5 (SWH25) rose by +0.50 (+0.10%).
On Tuesday, sugar prices climbed modestly as the Brazilian real (^USDBRL) surged to a two-week high against the U.S. dollar. This boost prompted short covering in sugar futures, making Brazilian sugar exports less appealing for producers due to the stronger currency.
In the last three months, however, sugar prices have generally decreased. The New York sugar futures hit a 3-1/2 month low last Tuesday, and London sugar futures fell to a 2-3/4 year low the previous Monday, driven by an improved global sugar supply forecast. On November 21, the International Sugar Organization (ISO) revised its global sugar deficit estimate for 2024/25 to -2.51 MMT, improving from an earlier prediction of -3.58 MMT. Additionally, the ISO updated its 2023/24 global sugar surplus estimate to 1.31 MMT from +200,000 MT previously.
Last Thursday, sugar prices briefly rebounded, reaching three-week highs due to reports of decreasing production in India, the world’s second-largest sugar producer. The Indian Sugar and Bio-energy Manufacturers Association (ISM) noted that India’s sugar output for the period from October 1 to December 31, 2024/25 dropped by 15.5% year-over-year, totaling 9.54 MMT. This decline could lead the Indian government to maintain export limitations, further constraining global sugar availability.
Conversely, Thailand’s anticipated increase in sugar production poses a bearish outlook for sugar prices. The Office of the Cane and Sugar Board in Thailand projected an 18% year-over-year rise in sugar production for 2024/25, reaching 10.35 MMT, compared to 8.77 MMT produced in the 2023/24 season. As the world’s third-largest sugar producer and second-largest exporter, Thailand’s growth is significant.
Additionally, on December 19, India’s Food Secretary Chopra indicated that sugar exports might be permitted if domestic needs are satisfied after meeting ethanol blending requirements. The Indian government currently expects a sugar surplus of approximately 1 MMT this season.
Challenges in Brazil, caused by drought and extreme heat last year, have harmed sugar crops, particularly in São Paulo, Brazil’s top sugar-producing state. The industry group Orplana reported that up to 80,000 hectares of sugarcane were affected by around 2,000 fire outbreaks. Green Pool Commodity Specialists estimate that as much as 5 MMT of sugarcane could have been lost due to these fires. Furthermore, Conab, Brazil’s governmental forecasting agency, adjusted its 2024/25 sugar production estimate down to 44 MMT from a previous 46 MMT because of reduced sugarcane yields attributed to drought conditions. The most recent report from Unica indicated that total Center-South sugar output had fallen by 5.1% year-over-year to 39.711 MMT through mid-December, with a sharp decrease in operational sugar mills, from 185 to just 129 compared to the previous year.
In a move to support sugar prices, India’s Food Ministry lifted restrictions on sugar mills for ethanol production starting November 2024/25, potentially prolonging export limits. In late 2023, India directed sugar mills to halt sugarcane use for ethanol production during the 2023/24 supply year to bolster sugar reserves. The country only allowed the export of 6.1 MMT of sugar during the 2022/23 season, a drop from the record 11.1 MMT the prior season. However, the ISM has projected that India will have 2 MMT available for export next season and is urging the government to lift existing restrictions.
The ISM also anticipated a 2% year-over-year decline in India’s 2024/25 sugar production, expected to total 33.3 MMT. It reported that India’s sugar reserves would stand at 8.4 MMT as of September 30, down from an earlier estimate of 9.1 MMT in May. Furthermore, the National Federation of India Cooperative Sugar Factories Ltd disclosed a substantial year-over-year decrease of 18% in sugar production from October 1 to December 15, with a resulting output of 6.1 MMT.
Supporting this downward trend, the ISO projected global sugar production to reach 179.3 MMT for 2024/25, reflecting a 1.1% decrease from 181.3 MMT in 2023/24.
In its bi-annual report released on November 21, the USDA forecasted a 1.5% increase in global sugar production for 2024/25, anticipating a record output of 186.619 MMT. This report also projected a 1.2% rise in global human sugar consumption to a new high of 179.63 MMT, while tiptoeing towards a decline in global sugar ending stocks by 6.1% to 45.427 MMT.
On the date of publication, Rich Asplund did not hold any positions—directly or indirectly—in any of the securities mentioned in this article. All information in this article is provided solely for informational purposes. For further details, please refer to the Barchart Disclosure Policy here.
The views expressed in this article belong to the author and do not necessarily reflect those of Nasdaq, Inc.
