Sugar Prices on the Rise Amidst Global Supply Changes
March NY world sugar #11 (SBH25) closed up +0.24 (+1.14%) on Wednesday, while March London ICE white sugar #5 (SWH25) rose by +2.10 (+0.39%).
Market Recovery Spurred by Rising Crude Oil Prices
On Wednesday, sugar prices experienced moderate gains. The London market rebounded from a one-month low, with traders engaging in short covering after WTI crude oil (CLF25) increased by over +2% to reach a one-week high. The rise in crude oil prices can bolster ethanol prices, potentially leading sugar mills to shift focus towards ethanol production instead of sugar, which could limit sugar supply.
Recent Fluctuations Reflect Changing Supply Outlook
Just the previous Monday, NY sugar had plunged to a two-and-a-half-month low due to an improved global supply outlook. The International Sugar Organization (ISO) reduced its global sugar deficit forecast for 2024/25 to -2.51 MMT, a revision from the August estimate of -3.58 MMT. Additionally, the ISO increased its estimate for global sugar surplus in 2023/24 to 1.31 MMT, up from +200,000 MT previously.
Thailand’s Production Boost Could Impact Prices
A rise in sugar production from Thailand may pose a negative outlook for sugar prices. The Office of the Cane and Sugar Board projected that Thailand’s production will surge by +18% year-on-year to 10.35 MMT for 2024/25. This follows an output of 8.77 MMT in the 2023/24 season, highlighting Thailand’s position as the world’s third-largest sugar producer and the second-largest exporter.
Brazil’s Production Challenges Affect Supply
Contrastingly, sugar output from Brazil’s Center-South is currently facing challenges. According to Unica, sugar production in this region has dropped by -59.2% year-on-year to 898 MT during early November. Cumulatively, sugar output for the 2024/25 season through mid-November is down -3.0% year-on-year to 38.274 MMT.
Earlier this year, drought and excessive heat led to fires in Brazil, devastating sugar crops in the crucial state of Sao Paulo. Orplana reported up to 2,000 fire outbreaks that affected approximately 80,000 hectares of sugarcane. Green Pool Commodity Specialists estimated losses of up to 5 MMT of sugarcane due to these fires. Subsequently, Brazil’s Conab reduced its sugar production estimate for 2024/25 from 46 MMT to 44 MMT, citing lower yields from drought conditions.
Indian Policy Affects Global Sugar Trade
In India, the Food Ministry’s decision on August 30 to lift restrictions on sugar mills producing ethanol for the 2024/25 year may extend existing sugar export curbs. Last December, India had ordered sugar mills to cease ethanol production from sugarcane for 2023/24 to boost domestic reserves. Sugar exports have been limited since October 2023 to maintain sufficient domestic supply, with India allowing only 6.1 MMT of sugar exports in the 2022/23 season—a significant decrease from the record 11.1 MMT in the prior season. However, the Indian Sugar and Bio-energy Manufacturers Association (ISM) has stated that India would have 2 MMT available for export in the upcoming season and suggested lifting the current export restrictions.
Production Projections and Global Supply Dynamics
The ISM reported on May 13 that sugar production in India for the 2023/24 season fell by -1.6% year-on-year to 31.4 MMT. It also estimated that production for 2024/25 would drop by -2% to 33.3 MMT, while reserves are expected to be at 8.4 MMT as of September 30, down from a prior projection of 9.1 MMT.
In a global context, the ISO predicted that worldwide sugar production for 2024/25 would reach 179.3 MMT, representing a -1.1% decrease from 181.3 MMT in the previous year. Meanwhile, the USDA’s bi-annual report on November 21 forecasted a +1.5% increase in global production for 2024/25 to a record 186.619 MMT, with human sugar consumption also expected to rise by +1.2% to 179.63 MMT. Additionally, the USDA anticipates that ending stocks for global sugar will decline by -6.1% year-on-year to 45.427 MMT.
On the date of publication, Rich Asplund did not hold positions in any of the securities mentioned in this article. All information and data in this article are provided for informational purposes only. For more information, please view the Barchart Disclosure Policy
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The views and opinions expressed herein are the author’s views and opinions and do not necessarily reflect those of Nasdaq, Inc.
