Global Sugar Prices Decline Amid Mixed Production Forecasts

Brazil’s Sugar Output Surges as Drought Wanes

March NY world sugar #11 (SBH25) has decreased by -0.14 (-0.63%), while December London ICE white sugar #5 (SWZ24) is down -4.10 (-0.72%). Today’s drop in sugar prices is largely influenced by rising sugar production in Brazil’s Center-South region, the country’s top sugar-producing area. Unica reported an 8% year-on-year increase in sugar output in this region for the first half of October, totaling 2.443 million metric tons (MMT). Furthermore, cumulative sugar output for the 2024/25 season showed a 1.9% rise, reaching 35.591 MMT.

Weather Forecasts Bring Relief to Brazil’s Crops

Predictions for heavy rainfall in Brazil’s Center-South over the upcoming week could relieve drought conditions, which is causing concern for sugar prices. Meteorologist Climatempo noted that the weather will bring significant rains, moderating temperatures and enhancing soil moisture levels.

Fires and Drought Impact on Brazilian Sugar Production

Recent wildfires, sparked by drought and excessive heat, have damaged sugar crops in São Paulo, Brazil’s leading sugar-producing state. The sugar cane industry group, Orplana, reported approximately 2,000 fire outbreaks affecting up to 80,000 hectares of sugarcane. Green Pool Commodity Specialists estimate that around 5 MMT of sugar cane was lost due to these fires. In view of these conditions, Conab, Brazil’s agricultural forecasting agency, lowered its sugar production estimate for 2024/25 to 42 MMT from 42.7 MMT, attributing this change to decreased sugarcane yields. Similarly, Rabobank adjusted its forecast down to 39.3 MMT while Datagro revised its estimate to 38.7 MMT, citing ongoing drought and mills’ limited capacities.

India’s Promising Monsoon Raises Fears of Price Drops

Additionally, optimism about a strong sugar crop in India, driven by the highest monsoon rainfall in four years, is influencing the market negatively. The Indian Meteorological Department reported 934.8 mm of rain as of September 30, standing 7.6% above the long-term average. This strong rainfall from June through September is expected to bolster crop yields.

Changes in India’s Sugar Export Policies

On a positive note for sugar prices, India’s Food Ministry lifted restrictions on ethanol production from sugar mills starting November for the 2024/25 season. This shift could extend India’s sugar export limitations. Last December, the country halted ethanol production to preserve sugar reserves. Since then, India has limited sugar exports significantly, allowing only 6.1 MMT during the 2022/23 season, down from a record 11.1 MMT the prior year. However, on October 3, the Indian Sugar and Bio-energy Manufacturers Association (ISM) projected that 2 MMT of sugar would be available for export next season, urging the government to reconsider current restrictions.

Thailand’s Increased Sugar Production Forecast

Meanwhile, Thailand’s forecast for a significant increase in sugar production adds to bearish trends in the market. The Office of the Cane and Sugar Board projected an 18% rise for the 2024/25 season, bringing production to an expected 10.35 MMT, compared to 8.77 MMT in the 2023/24 season. As the third-largest sugar producer globally and the second-largest exporter, Thailand’s output increase holds weight in the market.

Global Sugar Market Forecasts

A supportive factor for sugar prices comes from the International Sugar Organization (ISO), which forecasted a global sugar deficit of -3.58 MMT for the 2024/25 season, a significant increase from the -200,000 MT deficit estimated for 2023/24. The ISO anticipates a production decrease to 179.3 MMT, down 1.1% from 2023/24.

The USDA, in its bi-annual report released on May 23, projected a record global sugar production increase for 2024/25, estimating a 1.4% rise to 186.024 MMT. Additionally, it forecasted a 0.8% increase in human sugar consumption, reaching 178.788 MMT. However, ending stocks are expected to decrease by 4.7%, hitting a 13-year low of 38.339 MMT.

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On the date of publication, Rich Asplund did not hold any positions, directly or indirectly, in the securities mentioned in this article. All information presented here is purely informational. For more details, 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.