March Sugar Prices Rise as Brazil’s Currency Strengthens
Key Market Updates: Sugar prices increased on Tuesday, following a similar trend seen earlier in the week. The NY world sugar #11 (SBH25) rose by +0.06 (+0.31%), while March London ICE white sugar #5 (SWH25) gained +4.50 (+0.89%).
On Tuesday, sugar prices moved higher as they consolidated just below the three-week highs reached on Monday. A notable contributor to this increase has been the recent strength of the Brazilian real (^USDBRL), which rose to a two-month high against the dollar. This uptick has led to a reduction in export selling from sugar producers in Brazil.
This recent short-covering rally was driven by commodity funds holding significant short positions in sugar futures. The latest Commitment of Traders (COT) report indicated that, as of January 21, funds had raised their net-short position in NY sugar by 33,828 contracts, reaching a five-year high of 139,873 net shorts. Similarly, the net-short position in London sugar increased by 6,566 to also hit a five-year high of 18,708 net shorts during the same timeframe.
Just last week, sugar prices experienced a downturn, with NY sugar hitting a five-and-a-quarter-month low along with London sugar reaching a three-and-a-third-year low. This decline reflects an improving global sugar supply forecast. India announced plans to allow its sugar mills to export 1 million metric tons (MMT) this season, lifting previous restrictions that had been in place since October 2023 aimed at ensuring adequate domestic supplies. In the last season, India permitted only 6.1 MMT of sugar exports, a significant decrease from the record 11.1 MMT in the prior season.
In its latest assessment, the International Sugar Organization (ISO) has revised its global sugar deficit forecast for 2024/25, lowering it from -3.58 MMT to -2.51 MMT. Additionally, the ISO raised its estimate for the global sugar surplus for 2023/24 from an August projection of 200,000 metric tons to 1.31 MMT.
The sugar outlook appears bearish due to expected increases in production from Thailand. As of October 29, Thailand’s Office of the Cane and Sugar Board projected a surge in sugar production for the 2024/25 season, estimating an 18% annual increase to 10.35 MMT. In the previous 2023/24 season, Thailand produced 8.77 MMT of sugar, solidifying its status as the third-largest sugar producer and the second-largest exporter globally.
Conversely, signs of reduced sugar production in India, the second-largest producer, could provide some support for sugar prices. The Indian Sugar and Bio-energy Manufacturers Association (ISM) reported a 15.5% year-over-year decline in production for the period from October 1 to December 31, 2024/25, totaling 9.54 MMT. The ISM now anticipates a 13.8% drop in India’s overall sugar production to a five-year low of 27.6 MMT.
Brazil’s sugar industry suffered last year due to drought and extreme heat, which caused significant crop damage. Reports indicate that approximately 2,000 fire outbreaks affected around 80,000 hectares of sugarcane in Brazil’s primary producing state, Sao Paulo. Estimates suggest that up to 5 MMT of sugar cane may have been lost as a result. In response to these challenges, Brazil’s government crop forecasting agency has adjusted its production estimate for 2024/25 downward from 46 MMT to 44 MMT.
Moreover, as supportive factors for sugar prices, the ISO indicated a decrease in projected global sugar production for 2024/25, forecasting a total of 179.3 MMT, a drop of 1.1% year-over-year from 181.3 MMT in 2023/24.
The USDA, in its bi-annual report released on November 21, projected an increase in global sugar production to a record 186.619 MMT, reflecting a 1.5% year-over-year growth. Additionally, the USDA estimates global sugar consumption will rise by 1.2% to reach a record 179.63 MMT for 2024/25, while predicting a decline in global ending stocks 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 details, please view the Barchart Disclosure Policy here.
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