Mixed Sugar Prices as Market Faces Production Outlook Challenges

May NY world sugar #11 (SBK25) closed down -0.02 (-0.11%) on Thursday, while August London ICE white sugar #5 (SWQ25) saw a slight increase of +1.20 (+0.24%). Overall, sugar prices exhibited a mixed performance.

Pressure on sugar prices persisted from Wednesday’s USDA report, which estimated Brazil’s 2025/26 sugar production would increase by +2.3% year-on-year to 44.7 million metric tons (MMT), compared to 43.7 MMT the previous season. The market did, however, experience some recovery, especially in London, as weakness in the dollar (DXY00) led to short covering in sugar futures.

Concerns about the ongoing global trade war are additionally weighing on sugar prices. Analysts fear these tensions could hinder world economic growth, and that the introduction of tariffs may cause a rise in consumer sugar prices, potentially curtailing demand.

While there were downward pressures, losses remained limited due to reports of reduced sugar output in India. The Indian Sugar and Bio-Energy Manufacturers Association (ISMA) indicated that sugar production from October 1 to April 15 totaled 25.5 MMT, reflecting an 18% decrease from the same timeframe last year.

Last week, sugar prices remained under pressure, with NY sugar hitting a 2.5-year low, and London sugar reaching a three-month low. A forecast for beneficial rains in India raised concerns of a potentially bumper sugar crop, contributing to downward pricing pressures. As per India’s Ministry of Earth Sciences, this year’s monsoon is expected to be above normal, with total rainfall predicted to reach 105% of the long-term average. The anticipated monsoon season will occur from June through September.

Consultant Datagro, on March 12, projected a +6% year-on-year increase in Brazil’s Center-South sugar production for 2025/26 to 42.4 MMT. Similarly, Green Pool Commodity Specialists forecasted a shift in the global sugar market, expecting a surplus of +2.7 MMT for the 2025/26 crop year, reversing the earlier deficit of -3.7 MMT from 2024/25.

Additionally, the Indian government announced a measure on January 20 allowing sugar mills to export 1 MMT of sugar for the current season, easing prior export restrictions from 2023. These restrictions aimed to ensure sufficient domestic supplies, with only 6.1 MMT allowed for export during the 2022/23 season. Despite this, ISMA predicts a -17.5% year-on-year decline in India’s 2024/25 sugar production, reducing it to a five-year low of 26.4 MMT.

Further influencing market conditions, Thailand reported an increase in sugar production for the 2024/25 crop year, with output rising by +14% year-on-year to 10.00 MMT. Being the third-largest sugar producer globally, Thailand’s production boosts have bearish implications for sugar prices.

Despite this, indicators of a decline in worldwide sugar production could lend support to prices. Unica reported a 5.3% year-on-year decline in Brazil’s Center-South sugar output through March, totaling 40.169 MMT. Moreover, the ISMA adjusted its 2024/25 sugar production forecast for India downward to 26.4 MMT from an earlier estimate of 27.27 MMT, citing lower yields.

The International Sugar Organization (ISO) has recently raised its 2024/25 global sugar deficit forecast to -4.88 MMT from -2.51 MMT, signaling a tightening market compared to the surplus of 1.31 MMT seen in 2023/24. Additionally, the ISO has also cut its forecast for global sugar production in 2024/25, lowering it to 175.5 MMT from a previous estimate of 179.1 MMT.

Brazil’s sugar crops have faced challenges from drought and excessive heat, leading to damages due to fires in the country’s key sugar-producing state, Sao Paulo. Green Pool Commodity Specialists noted that as much as 5 MMT of sugar cane may have been lost to these fires. Following this trend, Brazil’s government crop forecasting agency, Conab, anticipated a -3.4% year-on-year decrease in sugar production for 2024/25, projecting a total of 44.118 MMT.

According to the USDA’s bi-annual report released on November 21, global sugar production is expected to rise by +1.5% year-on-year, reaching a record of 186.619 MMT for 2024/25, with consumption increasing +1.2% to a record 179.63 MMT as well. The USDA further indicated that global ending stocks for 2024/25 would see a notable decline of -6.1% year-on-year, totaling 45.427 MMT.

On the date of publication, Rich Asplund did not hold any positions in the securities mentioned in this article. All information and data in this article are provided for informational purposes only. For more information, please view the Barchart Disclosure Policy.

 

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