Sugar Prices Face Significant Decline Amid Global Supply Glut
Recent Developments Include Brazil’s High Sugarcane Crush and Weak Currency
March NY world sugar #11 (SBH25) closed down -0.84 (-4.06%) on Tuesday, while March London ICE white sugar #5 (SWH25) dropped -14.50 (-2.73%).
On Tuesday, sugar prices fell sharply, with New York sugar reaching a three-month low and London sugar hitting a four-month low. The main factor behind this downturn is Brazil’s unexpectedly large sugarcane crush. Last Thursday, Unica reported that Brazil crushed 20.35 million metric tons (MMT) of sugarcane in the second half of November, exceeding expectations of 15.5 MMT.
Further pressure on sugar prices came as the Brazilian real (^USDBRL) fell to an all-time low against the dollar. This depreciation encourages Brazilian sugar producers to increase exports, adding to global supply.
Additionally, the global supply outlook remains positive, which has further pushed down sugar prices. On November 21, the International Sugar Organization (ISO) revised its 2024/25 global sugar deficit forecast to -2.51 MMT, an improvement from the August forecast of -3.58 MMT. The ISO also increased its 2023/24 global sugar surplus estimate to 1.31 MMT, up from +200,000 MT projected in August.
In Thailand, an expected rise in sugar production poses another challenge for sugar prices. The Office of the Cane and Sugar Board stated on October 29 that Thailand’s sugar output is projected to increase by 18% year-on-year to 10.35 MMT, following 8.77 MMT produced in the 2023/24 season that ended in April. Thailand ranks as the world’s third-largest sugar producer and second-largest exporter.
On the other hand, reduced sugar production in India may provide some support for prices. The National Federation of India Cooperative Sugar Factories Ltd indicated that India’s sugar production from October 1 to December 15 has declined by 18% year-on-year to 6.1 MMT.
In Brazil, the Center-South region has seen a recent drop in sugar output, which could be favorable for prices. According to Unica, cumulative sugar output in the 2024/25 season through November is down 3.7% year-on-year to 39.361 MMT.
This year, drought and excessive heat led to significant crop damage in Brazil’s leading sugar-producing state, São Paulo. Industry group Orplana reported that around 2,000 fires impacted up to 80,000 hectares of planted sugarcane. Green Pool Commodity Specialists estimated that as much as 5 MMT of sugarcane may have been lost. Consequently, Brazil’s government crop forecasting agency, Conab, adjusted its 2024/25 sugar production estimate downward from 46 MMT to 44 MMT due to lower sugarcane yields caused by these adverse conditions.
Supporting sugar prices, India’s Food Ministry lifted restrictions on sugar mills producing ethanol for the 2024/25 year on August 30, which may extend sugar export controls in the country. Last December, the Indian government ordered sugar mills to halt ethanol production from sugarcane for the 2023/24 supply year to bolster sugar reserves. Since October 2023, India has restricted sugar exports to maintain adequate domestic supplies, allowing only 6.1 MMT of sugar to be exported during the 2022/23 season, down from a record 11.1 MMT in the previous season. However, the Indian Sugar and Bio-energy Manufacturers Association (ISM) noted on October 3 that India is expected to have 2 MMT of sugar for export next season, pressing the government to ease current export restrictions.
The ISM projected on September 26 that India’s sugar production for 2024/25 would decrease by 2% year-on-year to 33.3 MMT, while the country’s sugar reserves for the 2023/24 season would stand at 8.4 MMT as of September 30, compared to a May estimate of 9.1 MMT.
Looking globally, the ISO’s forecast on August 30 indicated a slight decline in sugar production for the 2024/25 year, estimating it at 179.3 MMT, down 1.1% from 181.3 MMT in 2023/24.
In a different report released by the USDA on November 21, global sugar production for 2024/25 was projected to reach a record 186.619 MMT, up 1.5% compared to the previous year. Human sugar consumption is also expected to rise by 1.2% year-on-year to a record 179.63 MMT, with global ending stocks anticipated to decrease 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 is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
