Declining Sugar Prices: A Mixed Bag of Production Insights
March NY world sugar #11 (SBH25) closed down -0.61 (-2.81%) on Friday, while March London ICE white sugar #5 (SWH25) fell by -8.40 (-1.51%).
Sugar prices settled lower last Friday, with NY sugar reaching a two-week low. A significant drop in the Brazilian real (^USDBRL) to record lows against the dollar encouraged sugar exporters in Brazil to sell, leading to a sell-off in sugar futures.
Adding to the bearish sentiment were improved sugar supplies. Last Thursday, the International Sugar Organization (ISO) revised its 2024/25 global sugar deficit forecast to -2.51 MMT, down from the August forecast of -3.58 MMT. Furthermore, the ISO adjusted its 2023/24 global sugar surplus estimate to 1.31 MMT from an earlier forecast of 200,000 MT.
On a positive note, Brazilian sugar production from the Center-South region has declined significantly. Unica reported that sugar output in this area dropped -59.2% year over year during the first half of November, totaling 898 MT. Cumulatively, the 2024/25 Center-South sugar output is down -3.0% year over year, amounting to 38.274 MMT.
Earlier in the week, sugar prices surged to two-week highs based on projections from Wilmar International. They suggested that the number of closed sugar mills in Brazil, currently at 38, could more than triple this month, further reducing the country’s sugar output. Typically, sugar mills in Brazil halt sugarcane processing during the rainy months of December and January but recent heavy rains have caused earlier closures than anticipated.
This year brought challenges for Brazilian sugar crops, especially in São Paulo, the country’s leading sugar-producing state. Drought and excessive heat resulted in fires that damaged sugarcane over an area of up to 80,000 hectares. Green Pool Commodity Specialists estimate that around 5 MMT of sugarcane may have been lost due to these fires. In response, Conab, Brazil’s government crop forecasting agency, reduced its overall 2024/25 sugar production estimate to 44 MMT from 46 MMT, attributing the revision to lower sugarcane yields.
Meanwhile, projections for heightened sugar production in Thailand are raising concerns for sugar prices. As of October 29, the Office of the Cane and Sugar Board indicated that Thailand’s sugar production for 2024/25 could rise by +18% year-over-year to 10.35 MMT, compared to 8.77 MMT produced in the previous season. Thailand ranks as the world’s third-largest sugar producer and a significant exporter.
A recent decision by India’s Food Ministry on August 30 could provide some support for sugar prices. The ministry lifted restrictions on sugar mills producing ethanol for the 2024/25 year, potentially prolonging export curbs. Last December, India halted its mills’ use of sugarcane for ethanol production to boost sugar reserves for the 2023/24 supply year. The government has restricted sugar exports since October 2023 to ensure enough domestic supplies. In the previous season, mills exported only 6.1 MMT of sugar, down from a record 11.1 MMT.
On May 13, the Indian Sugar and Bio-energy Manufacturers Association (ISM) disclosed that India’s 2023/24 sugar production from October to April fell -1.6% year over year to 31.4 MMT. The ISM also projected on September 26 that sugar production would decline by -2% year over year to 33.3 MMT in 2024/25, anticipating reserves to be at 8.4 MMT on September 30, lower than its May projection of 9.1 MMT.
Providing a counterbalance, the ISO had forecasted on August 30 a slight decrease in global sugar production for 2024/25 to 179.3 MMT, reflecting a -1.1% drop from the 181.3 MMT produced in 2023/24. Additionally, the USDA’s bi-annual report released last Thursday projected a rise of +1.5% year over year in global sugar production, reaching a record 186.619 MMT for 2024/25. They also indicated that global human sugar consumption could increase by +1.2% year over year to a record 179.63 MMT and that ending stocks should decline by -6.1% to 45.427 MMT for the same period.
On the date of publication,
Rich Asplund
did not hold any positions in the securities mentioned in this article. All information provided is for informational purposes only. For further details, please refer to the Barchart Disclosure Policy
here.
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