Sugar Prices Show Slight Gains Amid Market Uncertainty
On Monday, March NY world sugar #11 (SBH25) closed up +0.03%, while March London ICE white sugar #5 (SWH25) saw a gain of +1.80 (+0.35%).
Market Resilience Following Recent Lows
Sugar prices edged up on Monday, slightly recovering from last Thursday’s downturn, when NY sugar reached a three-month low and London sugar hit a four-month low. Despite this uptick, traders remain cautious as they await a report from Unica later this week detailing Brazil’s sugar production for the first half of December.
India’s Potential Export Policies Impact Prices
Last Thursday, sugar prices dipped after India’s Food Secretary, Chopra, indicated that the nation might permit sugar exports if there’s a surplus following domestic ethanol blending. Currently, India anticipates a sugar surplus of around 1 million metric tons (MMT) for this season.
Exchange Rate Pressures Affect Brazilian Exports
The Brazilian real (^USDBRL) weakened by -1.7% on Monday, hovering above last Thursday’s record low against the dollar. This currency drop incentivizes Brazilian sugar producers to increase exports, further weighing on sugar prices.
Global Supply Forecasts Influence Market Trends
An improved global sugar supply outlook has also contributed to pressure on prices. The International Sugar Organization (ISO) revised its forecast, reducing the anticipated global sugar deficit for 2024/25 to -2.51 MMT, improving from -3.58 MMT in August. Additionally, the ISO upped its 2023/24 global sugar surplus estimate to 1.31 MMT, up from the previous projection of +200,000 MT.
Thailand’s Production Increase and India’s Output Decline
Thailand, the world’s third-largest sugar producer, is expected to boost its sugar output by +18% year-over-year to 10.35 MMT in 2024/25, following a production of 8.77 MMT for the 2023/24 season. In contrast, India’s sugar production has diminished, with the National Federation of India Cooperative Sugar Factories Ltd reporting a drop of -18% year-over-year to 6.1 MMT from October 1 to December 15.
Brazil Faces Crop Challenges
Recent reports indicate that Brazil’s Center-South sugar output has fallen, which can positively influence prices. Unica disclosed that cumulative sugar production for the 2024/25 season is down -3.7% year-over-year to 39.361 MMT through November. Severe drought and intense heat have contributed to crop damage, particularly in Brazil’s top sugar-producing state of Sao Paulo. Estimates suggest that up to 80,000 hectares of sugarcane were affected by around 2,000 fire outbreaks this year.
Regulatory Changes in India
In a bid to support sugar prices, India’s Food Ministry lifted restrictions on sugar mills producing ethanol for the 2024/25 season starting this November. Last year, India halted sugarcane use in ethanol production to preserve sugar reserves. Since October 2023, India has maintained restrictions on sugar exports to ensure sufficient domestic supplies.
Future Production and Consumption Expectations
The Indian Sugar and Bio-energy Manufacturers Association has projected a -2% decrease in India’s 2024/25 sugar production to 33.3 MMT. Meanwhile, the USDA’s bi-annual report forecasted an increase in global 2024/25 sugar production by +1.5% to a record 186.619 MMT, alongside a forecasted +1.2% rise in global sugar consumption to 179.63 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 are solely for informational purposes. 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.
