Current Trends in Sugar Markets: Prices Rise Amid Supply Concerns
March NY world sugar #11 (SBH25) increased by +0.25 (+1.19%), while March London ICE white sugar #5 (SWH25) rose by +3.60 (+0.67%).
Market Dynamics: Rising Sugar Prices Amid Global Supply Changes
Sugar prices are showing moderate gains today as London sugar rebounds from a one-month low. A surge in WTI crude oil (CLF25), climbing over +1% to a one-week high, sparked short covering in sugar futures. The rise in the crude price supports ethanol prices, which may lead sugar mills to shift more cane crushing towards ethanol production, potentially limiting sugar supplies.
Recent Changes in Supply Forecasts
Last Monday, NY sugar fell to a 2-1/2 month low as projections for global sugar supply improved. On November 21, the International Sugar Organization (ISO) revised its forecast for the 2024/25 global sugar deficit to -2.51 MMT from an earlier estimate of -3.58 MMT in August. Additionally, ISO adjusted its 2023/24 global sugar surplus estimate up to 1.31 MMT, compared to +200,000 MT previously.
Thailand’s Sugar Production: A Potential Downturn for Prices
Thailand’s outlook appears bearish for global sugar prices. On October 29, Thailand’s Office of the Cane and Sugar Board indicated that sugar production for 2024/25 would rise by +18% year-over-year to 10.35 MMT, following a production of 8.77 MMT during the ended 2023/24 season. As the world’s third-largest sugar producer and second-largest exporter, any increase in Thailand’s production can influence global markets.
Brazil’s Challenges: Declining Production Figures
There’s also notable decline in sugar output from Brazil’s Center-South region. According to Unica, sugar production in this area dropped -59.2% year-over-year in the first half of November, reaching only 898 MT. The cumulative output for 2024/25 up to mid-November is down -3.0% y/y to 38.274 MMT.
This downturn can be attributed to earlier droughts and extreme heat that caused widespread fires in Brazil’s top sugar-producing state, Sao Paulo. Industry group Orplana reported that around 2,000 fires affected up to 80,000 hectares of sugarcane, leading to an estimated loss of 5 MMT of sugarcane. As a result, Brazil’s government crop forecasting agency, Conab, reduced its 2024/25 sugar production forecast from 46 MMT to 44 MMT, citing lower yields due to adverse weather conditions.
India’s Policies Affecting Supply
A supportive aspect for sugar prices comes from India’s Food Ministry, which on August 30, lifted restrictions on sugar mills for producing ethanol for the 2024/25 year starting in November. This could extend India’s sugar export limitations. In December, India mandated sugar mills to halt ethanol production from sugarcane to bolster sugar reserves. Since October 2023, India has been restricting sugar exports to secure domestic supplies, allowing only 6.1 MMT for the 2022/23 season, a significant drop from a record 11.1 MMT in the prior season. However, the Indian Sugar and Bio-energy Manufacturers Association (ISM) indicated on October 3 that India anticipates exporting around 2 MMT next season, urging the government to ease current restrictions.
According to ISM, India’s 2023/24 sugar production from October to April fell by -1.6% y/y to 31.4 MMT, and the forecast for the 2024/25 season indicates production might drop by -2% y/y to 33.3 MMT.
Global Production Trend Outlook
Globally, the ISO forecasts suggest a slight decline in sugar production, predicting 2024/25 figures at 179.3 MMT, down -1.1% from 181.3 MMT in 2023/24. In contrast, the USDA’s bi-annual report on November 21 projected global sugar production to rise by +1.5% y/y to a record 186.619 MMT, alongside a +1.2% y/y increase in human consumption, also to a record 179.63 MMT. The USDA further anticipates a -6.1% y/y decline in global ending stocks for 2024/25, projecting them at 45.427 MMT.
On the date of publication, Rich Asplund did not hold any positions, directly or indirectly, in any mentioned securities. This article is solely for informational purposes. For additional details, view the Barchart Disclosure Policy
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The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
