Sugar Prices Experience Volatility Amidst Global Supply Changes
Current Market Trends and Influences on Sugar Pricing
March NY world sugar #11 (SBH25) is down -0.19 (-0.89%), and May London ICE white sugar #5 (SWK25) is down -4.60 (-0.82%).
On Monday, NY sugar prices reached a new high not seen in 2-1/4 months before retreating slightly. This decline followed several weeks of significant price growth, driven by various market factors.
One major influence has been the Brazilian real (^USDBRL), which has strengthened between mid-December and mid-February. This rise has discouraged Brazilian sugar producers from selling their products, resulting in higher sugar prices. Recently, the real has stabilized below a 3-month peak against the US dollar.
Prices were also supported by a report indicating that India’s sugar production has dropped by -12% year-over-year to 19.7 MMT for the marketing year-to-date ending February 15, according to the India Sugar and Bio-Energy Manufacturers Association.
Alvean, the largest sugar trader globally, stated on February 13 that reduced rainfall in Brazil has led to underdeveloped sugarcane in some regions. If this trend continues without adequate rainfall, the upcoming sugar harvest set for April may face delays, which would negatively impact production.
Conversely, a decision by the Indian government on January 20 to allow sugar mills to export 1 MMT this season introduces a bearish element to the market. This easing of export restrictions comes after India limited sugar exports since October 2023 in order to keep domestic supplies stable. During the previous season of 2022/23, India permitted only 6.1 MMT of sugar exports, a decline from a record 11.1 MMT the season prior. Encouragingly, the India Sugar Mills Association (ISMA) anticipates that sugar production in India will drop by -15% year-over-year, reaching a five-year low of 27.27 MMT for the 2024/25 season.
In Thailand, the outlook for increased sugar production poses a bearish threat to global sugar prices. As of October 29, Thailand’s Office of the Cane and Sugar Board projected a notable +18% growth in production for 2024/25, forecasting a total of 10.35 MMT. This comes after Thailand produced 8.77 MMT of sugar in the 2023/24 season, making it the third-largest sugar producer and the second-largest exporter worldwide.
Last year, Brazil struggled with fires caused by drought and excessive heat, severely impacting sugar crops, particularly in Sao Paulo, Brazil’s leading sugar-producing state. Green Pool Commodity Specialists estimated that fires may have resulted in the loss of around 5 MMT of sugarcane. Consequently, Conab, Brazil’s crop forecasting agency, revised its 2024/25 production estimate down to 44 MMT from a prior prediction of 46 MMT, citing poor sugarcane yields stemming from unfavorable weather. Unica also reported last Thursday that cumulative sugar output in Brazil’s Center-South through January of 2024/25 dropped -5.5% year-over-year to 39.805 MMT.
According to a bi-annual report from the USDA released on November 21, global sugar production for 2024/25 is expected to rise by +1.5% year-over-year to an all-time high of 186.619 MMT. In terms of consumption, the USDA forecasts a +1.2% increase in human sugar consumption, reaching 179.63 MMT. Furthermore, the USDA projects a decrease in ending stocks by -6.1% year-over-year to 45.427 MMT.
The International Sugar Organization (ISO), in the same November report, highlighted a predicted global sugar deficit of -2.51 MMT for 2024/25, indicating a tightening market, especially when compared to a surplus of 1.31 MMT for 2023/24. In contrast, Green Pool Commodity Specialists on February 5 projected that the global sugar market might experience a shift to a surplus of +2.7 MMT in the 2025/26 crop year, following an estimated deficit of -3.7 MMT in 2024/25.
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.
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