Market Update: Sugar Prices Fluctuate Amid Rain Forecasts and Production Adjustments
On Friday, May NY world sugar #11 (SBK25) closed down -0.06 (-0.31%), while May London ICE white sugar #5 (SWK25) saw a slight increase of +2.80 (+0.52%).
NY sugar prices declined from two-week highs, influenced by forecasts for rain in Brazil next week. Somar Meteorologia has projected widespread showers, which could alleviate dryness concerns and enhance sugarcane yields.
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Recent Production Trends and Global Market Conditions
Initially, sugar prices on Friday extended this week’s rally to two-week highs. This rise was linked to reports of lower global sugar production. On Thursday, Unica revealed that cumulative 2024/25 Center-South sugar output through February fell -5.6% year-over-year, totaling 39.822 million metric tons (MMT). Additionally, the Indian Sugar and Bio-energy Manufacturers Association revised its 2024/25 sugar production forecast for India down to 26.4 MMT from 27.27 MMT, attributing the change to diminished cane yields.
The International Sugar Organization (ISO) recently increased its 2024/25 global sugar deficit forecast to -4.88 MMT from a previous -2.51 MMT in November. This shift indicates a tightening market, contrasting the 2023/24 global sugar surplus of 1.31 MMT. Furthermore, the ISO adjusted its 2024/25 global sugar production forecast down to 175.5 MMT from 179.1 MMT in November.
Demand Dynamics and Market Reactions
Last Thursday, sugar prices fell to seven-week lows, influenced by indications of weak demand. Notably, sugar traders Wilmar International Ltd and Sucres et Denrees SA delivered a record 1.7 MMT of raw sugar against the March New York futures contract that expired on February 28. Such substantial deliveries typically signal bearish market conditions, suggesting limited alternative avenues for sellers.
Adding to the bearish sentiment, on Wednesday, consultant Datagro projected Brazil’s Center-South sugar production for 2025/26 to rise 42.4 MMT, reflecting a +6% year-over-year increase. In a similar vein, sugar trader Czarnikow anticipated Brazil’s 2025/26 sugar production could reach a record 43.6 MMT due to the relative profitability of sugar over ethanol.
Government Policies and Global Production Outlook
Further contributing to bearish indicators, the Indian government announced on January 20 that it would permit exports of 1 MMT of sugar this season, easing prior restrictions imposed since October 2023 that aimed to maintain domestic supply levels. In the 2022/23 season ending September 30, India allowed sugar mills to export only 6.1 MMT, down from a record 11.1 MMT in the preceding season. Nonetheless, the India Sugar Mills Association (ISMA) forecasts that India’s 2024/25 sugar production will drop by -17.5% year-over-year, hitting a five-year low of 26.4 MMT.
The outlook for increased sugar production in Thailand also dampens market expectations. The Office of the Cane and Sugar Board in Thailand predicts that sugar production for 2024/25 will surge by +18% year-over-year, reaching 10.35 MMT, up from 8.77 MMT in the 2023/24 season. As the world’s third-largest sugar producer, Thailand plays a significant role in the global sugar supply chain.
Historical Context and Future Expectations
Recent drought conditions and severe heat last year led to fires that damaged sugar crops in Brazil’s key producing region, Sao Paulo. Green Pool Commodity Specialists estimated that as much as 5 MMT of sugarcane might have been lost due to these fires. Meanwhile, Conab, Brazil’s government crop forecasting agency, reduced its 2024/25 sugar production estimate to 44 MMT from 46 MMT, citing lower yields resulting from these adverse weather conditions.
The USDA’s bi-annual report released on November 21 projected a +1.5% year-over-year increase in global sugar production for 2024/25, reaching a record 186.619 MMT. Moreover, it expects global human sugar consumption to rise by +1.2% year-over-year to a record 179.63 MMT. The USDA also indicated that global sugar ending stocks would decrease by -6.1% year-over-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 is solely for informational purposes. For more information please view the Barchart Disclosure Policy.
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