Sugar Prices Spike Amid Crude Oil Gains and Global Output Trends
As of today, July NY world sugar #11 (SBN25) has increased by +0.36 (+2.06%), while August London ICE white sugar #5 (SWQ25) rose by +6.00 (+1.21%). Sugar prices have continued to climb, reaching one-week highs, bolstered by rising crude oil prices. The +1% rally in WTI crude oil (CLM25) signals a 1-1/2 week high, creating favorable conditions for ethanol production over sugar, which could diminish sugar supplies.
Recent Trends in Sugar Production
Last Friday, July NY sugar hit a 3-3/4 year nearest-futures low. Additionally, on Wednesday, London sugar dropped to a 3-1/2 month low due to predictions of increased sugar production in Brazil. According to Unica’s report released last Wednesday, Brazil’s Center-South sugar production for the first half of April rose +1.3% year-on-year to 731,000 MT. This report marks the beginning of forecasts for the 2025/26 season. Conab also predicted a +4.0% year-on-year increase in Brazil’s 2025/26 sugar production, estimating it at 45.875 MMT.
The forecast for larger global sugar production is weighing down prices. The USDA’s Foreign Agricultural Service (FAS) predicted a +26% year-on-year rise in India’s 2025/26 sugar production to 35 MMT, driven by favorable monsoon rains and expanded sugar acreage. Previously, on April 23, the USDA FAS estimated Brazil’s sugar production would increase by +2.3% year-on-year to 44.7 MMT, up from 43.7 MMT the season before.
Monsoon Impact on Indian Production
Prospects of high rainfall in India are exerting downward pressure on sugar prices. The Ministry of Earth Sciences projected an above-normal monsoon this year, with total rainfall expected to be 105% of the long-term average. The monsoon season in India unfolds from June to September, which may lead to a bumper sugar crop.
Moreover, Datagro’s predictions suggest that Brazil’s Center-South sugar production for 2025/26 may climb by +6% year-on-year to 42.4 MMT. Green Pool Commodity Specialists also forecast that the global sugar market will transition to a surplus of +2.7 MMT in the 2025/26 crop year, a reversal from the projected deficit of -3.7 MMT for 2024/25.
India’s Export Policy and Production Constraints
Bearish sentiment is further fueled by the Indian government’s decision on January 20 to permit its sugar mills to export 1 MMT of sugar this season, easing previous export restrictions. These restrictions, imposed since October 2023, aimed to ensure domestic supply stability. During the 2022/23 season, India managed to export only 6.1 MMT of sugar, a decrease from a record 11.1 MMT in the prior season. Nevertheless, the ISMA forecasts a reduction in India’s 2024/25 sugar production by -17.5% year-on-year to a five-year low of 26.4 MMT. As of April 17, the ISMA reported 25.5 MMT of production from October 1 to April 15, down -18% compared to the same timeframe last year. Indian Food Secretary Chopra stated that upcoming exports for 2024/25 might only reach 800,000 MT, below earlier expectations of 1 MMT.
Thai Production and Global Market Outlook
The forecast for increased sugar production in Thailand adds another bearish signal for sugar prices. Thailand’s Office of the Cane and Sugar Board announced last Friday that its 2024/25 sugar production would rise +14% year-on-year to 10.00 MMT. Thailand ranks as the world’s third-largest sugar producer and the second-largest sugar exporter.
On the other hand, some indicators show a decline in global sugar output, which might support prices. Unica noted on April 14 that Brazil’s cumulative Center-South sugar output for 2024/25 through March fell by 5.3% year-on-year to 40.169 MMT. The Indian Sugar and Bio-energy Manufacturers Association reduced its 2024/25 production forecast for India to 26.4 MMT from an earlier estimate of 27.27 MMT due to lower cane yields.
In addition, the International Sugar Organization (ISO) recently raised its 2024/25 forecast for the global sugar deficit to -4.88 MMT, up from a prior estimate of -2.51 MMT. This shift indicates a tightening market, moving from a 2023/24 global sugar surplus of 1.31 MMT. The ISO also downgraded its global sugar production outlook to 175.5 MMT from 179.1 MMT.
Impact of Weather Conditions on Production
Past weather conditions have heavily influenced sugar crops in Brazil. Drought and excessive heat last year led to significant crop damage in Brazil’s leading sugar-producing state, Sao Paulo. Green Pool Commodity Specialists estimated that approximately 5 MMT of sugar cane may have been lost due to fires. Conab’s recent forecast projected that Brazil’s sugar production for 2024/25 could decline by -3.4% year-on-year to 44.118 MMT due to lower sugarcane yields linked to these adverse conditions.
The USDA’s bi-annual report, released on November 21, projected global 2024/25 sugar production to increase by +1.5% year-on-year to a record 186.619 MMT, alongside a forecasted record rise in global sugar consumption of +1.2% year-on-year to 179.63 MMT. According to the USDA, global 2024/25 sugar ending stocks are expected to decline by -6.1% year-on-year to 45.427 MMT.
On the date of publication, Rich Asplund did not hold (either directly or indirectly) any positions in the securities mentioned in this article. All information and data in this article are for informational purposes only. For further information, please view the Barchart Disclosure Policy.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
