Sugar Prices Decline as Brazil Weather Improves and Exports Stabilize

May NY world sugar #11 (SBK25) is down -0.34 (-1.76%), while May London ICE white sugar #5 (SWK25) decreased by -4.20 (-0.78%).

Market Overview: Price Drops Linked to Weather Forecasts

Today, sugar prices fell to 1-1/2 week lows as predicted rains for Brazil alleviated concerns about dryness. This situation prompted long liquidation in sugar futures. Meteorologist Climatempo predicts widespread showers in Brazil’s sugar-growing regions through next week. Additionally, India plans to continue its one-million-ton sugar export quota for the current season, which alleviates fears of export restrictions from the world’s second-largest sugar producer.

Recent Price Trends and Production Reports

Over the past two weeks, sugar prices surged significantly, with NY sugar reaching a one-month high last Tuesday and London sugar achieving a four-month peak due to indications of lower global sugar production. According to Unica, Brazil’s cumulative 2024/25 sugar output through mid-March plummeted -5.3% year-on-year to 39.983 million metric tons (MMT). In another sign of tightening supplies, sugar trader Czarnikow revised its Brazil 2025/26 sugar production estimate down to 42 MMT from a previous forecast of 43.6 MMT made in February. The Indian Sugar and Bio-energy Manufacturers Association also reduced its production forecast for India’s 2024/25 sugar production to 26.4 MMT, citing lower sugar cane yields.

Global Sugar Deficit Forecasts Amid Production Cuts

The International Sugar Organization (ISO) has increased its global sugar deficit forecast for 2024/25 to -4.88 MMT, up from -2.51 MMT predicted in November, signaling a shift from the previous season’s global sugar surplus of 1.31 MMT. Moreover, the ISO adjusted its 2024/25 global sugar production forecast downward to 175.5 MMT from 179.1 MMT in November.

Potential Supply Increases and Government Policies

Conversely, constraints on sugar prices may arise from expectations of increased sugar production in Brazil. Consultant Datagro estimated that Brazil’s Center-South sugar production could increase by +6% year-on-year to 42.4 MMT in 2025/26. Green Pool Commodity Specialists also forecast a shift to a surplus of +2.7 MMT in the global sugar market for the 2025/26 crop year, after estimating a deficit of -3.7 MMT in 2024/25.

A bearish element includes the Indian government’s decision on January 20 to permit sugar mills to export 1 MMT of sugar this season. This policy change eases the restrictions that have been in place since October 2023, which aimed to secure domestic supplies. The India Sugar Mills Association (ISMA) has projected a -17.5% year-on-year decrease in India’s 2024/25 sugar production, which is expected to hit a five-year low of 26.4 MMT.

Southeast Asia Production Forecasts and Market Effects

Furthermore, expectations for increased sugar production in Thailand may contribute to bearish market sentiments. Thailand’s Office of the Cane and Sugar Board has projected an +18% year-on-year surge in its 2024/25 sugar production to 10.35 MMT, following an output of 8.77 MMT in the 2023/24 season. Thailand ranks as the world’s third-largest sugar producer and the second-largest exporter.

Impact of Climate on Crop Yields

Last year’s drought and excessive heat resulted in fires that damaged sugar crops in Brazil’s leading sugar-producing state, São Paulo. Green Pool Commodity Specialists indicated that these fires could have destroyed as much as 5 MMT of sugar cane. Consequently, Conab, Brazil’s government crop forecasting agency, has lowered its 2024/25 Brazil sugar production estimate from a prior forecast of 46 MMT to 44 MMT due to anticipated lower sugar cane yields stemming from adverse weather conditions.

USDA Insights on Global Sugar Production and Consumption

In its bi-annual report released on November 21, the USDA projected a +1.5% year-on-year increase in global 2024/25 sugar production, which is expected to reach a record 186.619 MMT. Additionally, the USDA forecasts a +1.2% rise in global sugar consumption to a record of 179.63 MMT for the same period. The report also anticipates a -6.1% year-on-year decrease in global 2024/25 sugar ending stocks, estimating them at 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 presented are for informational purposes only. For more details, please view the Barchart Disclosure Policy here.

The views and opinions expressed herein reflect the author’s own views and do not necessarily represent those of Nasdaq, Inc.