Sugar Market Faces Decline Amid Adjusted Supply Estimates
March NY world sugar #11 (SBH25) closed down -0.43 (-2.36%) on Tuesday, while March London ICE white sugar #5 (SWH25) fell -7.90 (-1.67%).
Recent Price Drops Linked to Global Supply Improvements
On Tuesday, sugar prices saw a continued decline, marking a 3.5-month sell-off. NY sugar reached a five-month low for nearest futures, and London sugar hit a three-and-a-half-year low. An improved global sugar supply outlook is influencing these price drops. India announced it would permit sugar mills to export 1 million metric tons (MMT) this season, easing restrictions that had been in place since October 2023 to ensure adequate domestic supplies. In the previous 2022/23 season, India allowed only 6.1 MMT of sugar exports, a significant decrease from a record 11.1 MMT the prior year.
2024/25 Global Sugar Deficit Forecast Adjusted
On November 21, the International Sugar Organization (ISO) revised its global sugar deficit forecast for 2024/25 to -2.51 MMT, improving from an earlier estimate of -3.58 MMT. The ISO also projected a global sugar surplus of 1.31 MMT for 2023/24, up from 200,000 MT in August.
Thailand’s Anticipated Production Surge
The forecast for increased sugar production in Thailand adds to the bearish outlook for prices. Thailand’s Office of the Cane and Sugar Board predicts a rise of 18% year-on-year in 2024/25 production, reaching 10.35 MMT. In the previous season, Thailand produced 8.77 MMT, highlighting its role as the world’s third-largest sugar producer and second-largest exporter.
Commodity Funds’ Short Positions Impacting the Market
A significant short position held by commodity funds may trigger a rally as short-covering occurs. According to last Friday’s Commitment of Traders (COT) report, funds increased their net-short position in NY sugar to a five-year high of 106,045 by adding 47,005. Moreover, London sugar net shorts also peaked at 121,425, increasing by 9,627.
Support from India’s Production Decline
Despite the overall negative sentiment, there are supportive signs from India’s sugar production data. The Indian Sugar and Bio-energy Manufacturers Association (ISM) reported a 15.5% year-on-year drop in India’s 2024/25 sugar production from October to December, totaling 9.54 MMT. It is projected that India’s overall production may fall by 13.8% to a five-year low of 27.6 MMT.
Damage in Brazil’s Sugar Industry
In Brazil, drought and extreme heat have severely damaged sugar crops, particularly in São Paulo, the top sugar-producing state. The sugar cane industry group Orplana indicated that around 2,000 fire incidents impacted up to 80,000 hectares of sugarcane. Green Pool Commodity Specialists estimated that as much as 5 MMT of sugar cane lost in these fires. Brazil’s government crop forecasting agency, Conab, lowered its 2024/25 sugar production estimate to 44 MMT from 46 MMT, attributing the change to reduced sugarcane yields caused by adverse weather conditions. Furthermore, Unica reported a 5.4% decrease in cumulative Center-South sugar output for 2024/25 through December, amounting to 39.78 MMT.
Projected Sugar Production Trends
The ISO’s forecast from August 30 projected a slight global sugar production decline for 2024/25 to 179.3 MMT, down 1.1% from 2023/24’s 181.3 MMT. Contrarily, the USDA’s biannual report on November 21 predicted a 1.5% rise in global sugar production for 2024/25, projecting a record 186.619 MMT. The USDA also expected human sugar consumption to increase by 1.2% to an all-time high of 179.63 MMT, while estimating a drop in global ending stocks by 6.1% to 45.427 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 is solely for informational purposes. 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.
