Sugar Prices Fall Amid Demand Concerns and Production Projections

May NY world sugar #11 (SBK25) fell by -0.29 (-1.57%), while May London ICE white sugar #5 (SWK25) decreased by -7.00 (-1.31%).

Today, sugar prices continued their downward trend, reaching the lowest point in 2-1/2 weeks. The decline is largely attributed to recent demand concerns following record deliveries of 1.7 million metric tons (MMT) of raw sugar by traders Wilmar International Ltd and Sucres et Denrees SA against the March NY futures contract that expired last Friday. Such large deliveries are often viewed as bearish for prices, as they suggest sellers may be struggling to find other markets.

Market Pressures and Production Forecasts

Sugar prices faced challenges earlier in the week when sugar trader Czarnikow predicted that Brazil’s sugar production for the 2025/26 season could reach a record 43.6 MMT. Czarnikow indicated that producing sugar is more profitable than ethanol, which could increase sugar supply.

In a related development, the International Sugar Organization (ISO) raised its forecast for the 2024/25 global sugar deficit from -2.51 MMT to -4.88 MMT, highlighting a tightening market following the 2023/24 global surplus of 1.31 MMT. Additionally, the ISO revised its 2024/25 global sugar production forecast down from 179.1 MMT to 175.5 MMT. Green Pool Commodity Specialists also projected a shift in the global sugar market, estimating it will move to a surplus of +2.7 MMT in the 2025/26 crop year compared to a deficit of -3.7 MMT for 2024/25.

Last Tuesday, sugar prices reached a 2-3/4 month high, driven by a significant rally from mid-January. During this period, the Brazilian real (^USDBRL) appreciated against the dollar, which discouraged export selling from Brazil’s producers and prompted considerable fund short-covering in sugar futures.

Production Trends in Key Markets

Support for sugar prices stemmed from a report last Friday showing that India’s sugar production fell by -14% year-over-year to 21.98 MMT during the marketing year-to-date from October 1 through February 28, according to the India Sugar and Bio-Energy Manufacturers Association.

However, the Indian government announced on January 20 that it would permit sugar mills to export 1 MMT this season, easing prior restrictions to ensure adequate domestic supplies. India limited its sugar exports to only 6.1 MMT during the 2022/23 season, down from a record 11.1 MMT the previous season. The India Sugar Mills Association (ISMA) anticipates a further decline in India’s 2024/25 sugar production, projecting a -15% drop to a five-year low of 27.27 MMT.

In Thailand, projections for higher sugar production also pose a bearish impact on prices. On October 29, Thailand’s Office of the Cane and Sugar Board forecasted its 2024/25 sugar output to increase by +18% year-over-year to 10.35 MMT, up from 8.77 MMT in the 2023/24 season. As the third-largest sugar producer globally, Thailand is a significant exporter in the market.

Impact of Climate Factors in Brazil

Brazil’s sugar production faced setbacks last year due to drought and excessive heat, with fires damaging crops in São Paulo, the country’s primary sugar-producing state. Green Pool Commodity Specialists noted that as much as 5 MMT of sugar cane could have been lost due to these fires. As a result, Brazil’s government crop forecasting agency, Conab, revised its 2024/25 sugar production estimate down from 46 MMT to 44 MMT, citing decreased sugarcane yields.

Unica reported a cumulative sugar output for the 2024/25 season in Brazil’s Center-South region, showing a -5.6% year-over-year decline to 39.812 MMT through mid-February.

The USDA’s bi-annual report, released on November 21, projected that global sugar production would increase by +1.5% year-over-year to a record 186.619 MMT for 2024/25, while human sugar consumption is expected to rise by +1.2% to a record 179.63 MMT. The USDA also forecasts a -6.1% decrease in global sugar ending stocks 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.