Sugar Prices Decline Amid Market Concerns and Production Forecasts

On Monday, May NY world sugar #11 (SBK25) closed down -0.12 (-0.67%), while August London ICE white sugar #5 (SWQ25) did not trade due to the London market’s closure for the Easter Monday holiday. The decline in NY sugar followed a brief rise, as prices fell from a one-week high largely due to a sell-off in equity markets, which created a risk-off sentiment affecting asset prices.

Initially, sugar prices moved higher after the dollar index (DXY00) dropped to a three-year low. Additionally, the market received a boost from news reported last Thursday about reduced sugar output in India. The Indian Sugar and Bio-Energy Manufacturers Association (ISMA) revealed that sugar production from October 1 to April 15 amounted to 25.5 million metric tons (MMT), representing an 18% decline from the same period last year.

Market Responses and Production Concerns

Over the previous week, sugar prices faced downward pressure. NY sugar reached a nearest-futures low not seen in 2-1/2 years last Tuesday, while London sugar touched a three-month low the following day. Expectations of favorable rain conditions in India that could lead to a large sugar crop have also negatively influenced sugar prices. Reports from India’s Ministry of Earth Sciences forecast an above-normal monsoon this year, predicting total rainfall of 105% of the long-term average during the June to September season.

Furthermore, concerns persist about global trade tensions potentially dampening world economic growth. Fear that tariffs may raise consumer sugar prices could also reduce demand. A bearish outlook has been reinforced by consultant Datagro’s March 12 report, which estimated Brazil’s Center-South sugar production for 2025/26 could increase by 6% year-on-year to 42.4 MMT. Green Pool Commodity Specialists added to the bearish sentiment on February 5, projecting a market shift to a surplus of 2.7 MMT in the 2025/26 crop year, following a forecasted deficit of 3.7 MMT in 2024/25.

India’s Export Policies and Production Forecasts

In January, the Indian government announced a plan to allow sugar mills to export 1 MMT this season, lifting some restrictions that had limited exports since October 2023. This policy change followed a reduced export allowance of 6.1 MMT during the 2022/23 season, a decline from the record 11.1 MMT exported the previous season. The ISMA anticipates that India’s sugar production for 2024/25 will drop by 17.5% year-on-year, reaching a five-year low of 26.4 MMT.

Thailand’s Production Growth

On a bearish note, the outlook for increased sugar production in Thailand adds further pressure. Thailand’s Office of the Cane and Sugar Board reported that the country’s sugar production for 2024/25 is projected to rise by 14% year-on-year to 10.00 MMT. Thailand stands as the world’s third-largest sugar producer and the second-largest exporter.

Global Production Dynamics

Meanwhile, signs indicating a decline in global sugar production may offer some support for prices. A report from Unica last Monday stated that cumulative sugar output in Brazil’s Center-South region through March fell by 5.3% year-on-year to 40.169 MMT. Additionally, ISMA revised its 2024/25 forecast for India’s sugar production down to 26.4 MMT from an earlier estimate of 27.27 MMT, attributing the decrease to lower sugarcane yields.

The International Sugar Organization (ISO), on March 6, adjusted its forecast for the 2024/25 global sugar deficit to -4.88 MMT, an increase from its earlier estimate of -2.51 MMT in November. The ISO also revised the global sugar production estimate down to 175.5 MMT from 179.1 MMT.

Last year’s drought and excessive heat led to fires damaging sugar crops in Brazil’s leading sugar-producing state of Sao Paulo. Green Pool Commodity Specialists identified that up to 5 MMT of sugar cane could have been lost due to these fires. Conab, Brazil’s governmental crop forecasting agency, predicted a 3.4% year-on-year drop in sugar production for 2024/25, estimating output at 44.118 MMT and citing lower sugarcane yields resulting from adverse weather conditions.

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

On the date of publication, Rich Asplund did not hold any positions in the mentioned securities, either directly or indirectly. All data in this article is provided for informational purposes. Please review the Barchart Disclosure Policy for more information.

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The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.