Sugar Prices Sink Amid Global Supply Adjustments
Key Developments: March NY world sugar #11 (SBH25) dips by -0.91 (-4.40%), while March London ICE white sugar #5 (SWH25) declines by -15.60 (-2.95%).
Sugar prices are experiencing steep declines today, reaching a three-month low in New York and a four-month low in London. The primary factor behind this drop is Brazil’s unexpectedly high sugarcane crush. Recent data from Unica indicated that Brazil processed 20.35 million metric tons (MMT) of sugarcane in the latter half of November, surpassing the forecast of 15.5 MMT.
Further compounding the situation, the Brazilian real (^USDBRL) recently fell to an all-time low against the dollar. This depreciation makes exports more appealing for Brazil’s sugar producers, boosting global supply levels.
In addition, a more favorable global supply outlook is placing pressure on sugar prices. The International Sugar Organization (ISO) revised its forecast for the global sugar deficit for 2024/25, lowering it to -2.51 MMT from a previous -3.58 MMT. It also upgraded the 2023/24 global sugar surplus projection to 1.31 MMT, a notable increase from the August estimate of +200,000 MT.
Thailand’s sugar production is also expected to rise, which weighs heavily on global sugar prices. On October 29, the Office of the Cane and Sugar Board of Thailand predicted an 18% year-on-year increase in production for the 2024/25 season, reaching 10.35 MMT, up from 8.77 MMT in the previous season. Thailand holds the position of the world’s third-largest sugar producer and the second-largest exporter.
Despite the global oversupply, India presents a glimmer of hope for sugar prices. The National Federation of India Cooperative Sugar Factories Ltd reported a decline in India’s sugar production by 18% year-on-year for the period from October 1 to December 15, amounting to 6.1 MMT.
On a more localized level, Brazil’s Center-South region has recently seen a decrease in sugar output, which serves as a bullish signal for future prices. Unica’s last report indicated a cumulative sugar production in this region of 39.361 MMT for the 2024/25 season, down 3.7% year-on-year.
Earlier this year, drought and high temperatures led to severe wildfires in Brazil, particularly harming the sugar crops in the state of Sao Paulo. Reports estimate that around 2,000 fires impacted up to 80,000 hectares of sugarcane, potentially resulting in a loss of around 5 MMT of sugarcane. On November 21, Conab, Brazil’s crop forecasting agency, reduced its sugar production estimate for 2024/25 to 44 MMT from 46 MMT, citing adverse yield conditions from drought.
Moreover, India’s Food Ministry’s decision on August 30 to lift restrictions on ethanol production from sugarcane for the 2024/25 year could extend the country’s sugar export controls. Since October 2023, India has limited sugar exports to maintain domestic supply balances. During the 2022/23 season, India allowed exports of only 6.1 MMT, down from a record 11.1 MMT in the previous season. The Indian Sugar and Bio-energy Manufacturers Association (ISM) recently suggested that India would have only 2 MMT of sugar available for export next season, urging the government to reconsider its current export constraints.
On September 26, the ISM also projected a 2% year-on-year decline in India’s sugar production for 2024/25 to 33.3 MMT. Current estimates suggest India’s sugar reserves will stand at 8.4 MMT as of September 30, compared to earlier expectations of 9.1 MMT.
In a related forecast, the ISO on August 30 predicted a slight global sugar production decrease for 2024/25 to 179.3 MMT, a reduction of 1.1% year-on-year from 181.3 MMT in 2023/24. Conversely, the USDA’s biannual report released on November 21 estimated a global increase in sugar production for 2024/25 to 186.619 MMT, marking a growth of 1.5% year-on-year, with human sugar consumption anticipated to rise to a record 179.63 MMT. However, the USDA also forecast a decline in global ending stocks for the same period, estimating them to fall by 6.1% year-on-year 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 are solely for informational purposes. For more information, please view the Barchart Disclosure Policy
here.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
