Sugar Prices Fall as Brazilian Real Weakens and Production Forecasts Shift

May NY world sugar #11 (SBK25) closed down -0.37 (-1.96%) on Friday, while May London ICE white sugar #5 (SWK25) decreased by -7.10 (-1.32%). This marks the third consecutive day of decline in sugar prices, reaching two-week lows driven by a decline in the Brazilian real (^USDBRL). The real dropped to a one-month low against the dollar on Friday, which encouraged Brazil’s sugar producers to sell exports and led to long liquidation in sugar futures.

Market Influences and Production Projections

The downward trend in sugar prices was already in motion from Wednesday when sugar trader Czarnikow forecasted Brazil’s 2025/26 sugar production to reach a record 43.6 million metric tons (MMT). The firm remarked that producing sugar is currently more profitable than producing ethanol.

Additionally, the International Sugar Organization (ISO) updated its global sugar supply outlook. On Thursday, it revised the 2024/25 global sugar deficit forecast to -4.88 MMT, up from November’s -2.51 MMT prediction. This shift indicates a tightening market, especially when compared to the 2023/24 global sugar surplus of 1.31 MMT. The ISO also lowered its 2024/25 global sugar production estimate to 175.5 MMT from the previous forecast of 179.1 MMT. Meanwhile, Green Pool Commodity Specialists expect the global sugar market to transition from a deficit of -3.7 MMT in 2024/25 to a surplus of +2.7 MMT in the 2025/26 crop year.

Recent Trends in Sugar Prices

Sugar prices briefly reached a new two-and-a-half month high on Tuesday, continuing the strong rally that began in mid-January. A surge in the Brazilian real from mid-December to mid-February, which peaked at a three-and-a-half month high against the dollar, had previously discouraged export selling from Brazil’s producers and prompted extensive fund short-covering in sugar futures.

Support for sugar prices further emerged from reports indicating that India’s sugar production has declined by 14% year-on-year to 21.98 MMT in the marketing year-to-date, from October 1 through February 28, according to the India Sugar and Bio-Energy Manufacturers Association.

Challenges and Export Regulations

On February 13, Alvean, the world’s largest sugar trader, commented on below-average rainfall in Brazil, suggesting that sugarcane development may be inadequate in some regions. If precipitation doesn’t improve, the upcoming sugar harvest scheduled for April may face delays, adversely affecting production.

Amid these challenges, the Indian government announced on January 20 that it would permit sugar mills to export 1 MMT of sugar for the current season. This decision eases the restrictions previously in place to ensure sufficient domestic supplies. Last season, India permitted only 6.1 MMT of sugar exports, following a record 11.1 MMT the previous year. Nevertheless, the India Sugar Mills Association (ISMA) expects India’s 2024/25 sugar production to drop by 15% year-on-year to a five-year low of 27.27 MMT.

Overall Market Dynamics

Bearish sentiment in sugar prices is also fueled by Thailand’s projected increase in sugar production. On October 29, Thailand’s Office of the Cane and Sugar Board estimated a growth of +18% year-on-year to 10.35 MMT in 2024/25, following an output of 8.77 MMT in the 2023/24 season. As the world’s third-largest sugar producer and the second-largest exporter, this increase could further affect global sugar prices.

Recent drought and extreme heat last year resulted in destructive fires impacting sugar crops in Brazil’s leading sugar-producing state, Sao Paulo. Green Pool Commodity Specialists noted that approximately 5 MMT of sugarcane may have been lost to these fires. Responding to these conditions, Conab, Brazil’s government crop forecasting agency, reduced its 2024/25 sugar production estimate from 46 MMT to 44 MMT, attributing this to diminished sugarcane yields from adverse weather conditions. Furthermore, Unica reported that cumulative sugar output in Brazil’s Center-South region fell by 5.6% year-on-year to 39.812 MMT as of mid-February 2024.

The USDA’s biannual report, released on November 21, projected that global 2024/25 sugar production would rise by 1.5% year-on-year to a record 186.619 MMT. Similarly, global sugar consumption is anticipated to increase by 1.2% year-on-year, reaching a record 179.63 MMT. The USDA also estimated a decline of 6.1% year-on-year in global sugar ending stocks, forecasted to be 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 and data in this article are solely for informational purposes. For detailed disclosures, please view the Barchart Disclosure Policy here.

 

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