Sugar Prices Experience Modest Gains Amid Global Market Shifts

Crude Oil Surge and Production Insights Shape Market Sentiment

March NY world sugar #11 (SBH25) rose by +0.15 (+0.78%), while March London ICE white sugar #5 (SWH25) increased by +4.70 (+0.93%) today.

After a period of early losses, sugar prices saw a moderate recovery. Today’s increase was influenced by a rally in WTI crude oil (CLG25), which reached an 8-week high, prompting short covering in sugar futures. The rising crude prices positively impact ethanol values; as a result, sugar mills might shift focus from sugar production to ethanol, possibly leading to lower sugar supplies.

In the last three months, sugar prices generally trended down due to improved global supply expectations. NY sugar today hit a 3-1/2 month nearest-futures low, while London sugar recorded a 2-3/4 year low on Monday. The International Sugar Organization (ISO) updated its global sugar deficit forecast for 2024/25 to -2.51 MMT, an improvement from August’s forecast of -3.58 MMT. Moreover, the ISO revised its 2023/24 global sugar surplus estimate to 1.31 MMT from an earlier projection of +200,000 MT.

In Thailand, the outlook for increased sugar production adds bearish sentiment to the market. On October 29, Thailand’s Office of the Cane and Sugar Board anticipated an 18% year-on-year increase in sugar production for 2024/25, expecting it to reach 10.35 MMT. This comes after the country produced 8.77 MMT of sugar in the 2023/24 season that concluded in April. As the world’s third-largest sugar producer, Thailand plays a significant role in the global sugar market.

In India, food officials have indicated that sugar exports might occur if there is a surplus after meeting domestic ethanol blending requirements. Currently, India expects a sugar surplus of about 1 MMT this season.

Further affecting sugar prices, the Brazilian real (^USDBRL) has weakened, making exports more appealing for sugar producers in Brazil. Presently, the real is slightly above its record low against the dollar, which was established on December 18.

This year, Brazil’s top sugar-producing state, Sao Paulo, faced drought and extreme heat that led to numerous fires damaging sugar crops. The sugar cane industry group, Orplana, reported that around 2,000 fire outbreaks impacted up to 80,000 hectares of sugarcane. Green Pool Commodity Specialists estimated that the fires might have resulted in a loss of up to 5 MMT of sugar cane. In response, Brazil’s government crop forecasting agency, Conab, lowered its 2024/25 sugar production estimate from 46 MMT to 44 MMT, citing reduced sugarcane yields. Additionally, Unica reported a year-on-year decrease of 5.1% in cumulative sugar production in the Center-South region for 2024/25, totaling 39.711 MMT, with only 129 sugar mills operating compared to 185 last year during the same time frame.

In a development that could support sugar prices, India’s Food Ministry removed restrictions on ethanol production for sugar mills for the upcoming 2024/25 year, starting in November. This decision may extend India’s export curbs on sugar. Last December, in an effort to increase sugar reserves, India mandated sugar mills to halt sugarcane usage for ethanol production during the 2023/24 supply year. Since October 2023, India has restricted sugar exports to ensure adequate domestic supplies, allowing only 6.1 MMT during the 2022/23 season, a substantial drop from the previous season’s record of 11.1 MMT. However, as of October 3, the Indian Sugar and Bio-energy Manufacturers Association (ISM) projected that India would have 2 MMT of sugar available for export next season and urged the government to lift current export restrictions.

On September 26, the ISM estimated that sugar production in India for 2024/25 would decline by 2% year-on-year to 33.3 MMT. Current projections show India’s sugar reserves at 8.4 MMT as of September 30, compared to a May estimate of 9.1 MMT. Furthermore, a report released last Monday by the National Federation of India Cooperative Sugar Factories Ltd indicated that sugar production from October 1 to December 15 fell by 18% year-on-year, totaling 6.1 MMT.

The International Sugar Organization (ISO), on August 30, forecasted a slight decrease in global sugar production for 2024/25, projecting it to be 179.3 MMT, down 1.1% from 181.3 MMT in 2023/24.

According to the USDA’s bi-annual report released on November 21, global sugar production for 2024/25 is expected to rise by 1.5% year-on-year, reaching a record 186.619 MMT. Human sugar consumption worldwide is projected to increase by 1.2% to a record 179.63 MMT, with a forecast showing a decline of 6.1% year-on-year in global sugar ending stocks, expected to be 45.427 MMT.

On the date of publication, Rich Asplund did not hold any positions in the securities mentioned in this article. All information and data in this article are for informational purposes only. For more information, 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.