Sugar Prices Face Downward Pressure Amidst Mixed Global Factors
Market Snapshot: Sugar Futures End Lower
March NY world sugar #11 (SBH25) closed down -0.38 (-1.71%) on Friday, while December London ICE white sugar #5 (SWZ24) fell -6.30 (-1.12%).
Strong Dollar and Weather Forecasts Impact Prices
On Friday, sugar prices recorded moderate declines, largely influenced by a stronger U.S. dollar. Throughout the week, sugar has struggled, posting a 2-week low for NY sugar on Monday and a 1.5-month low for London sugar on Wednesday. This drop reflects forecasts predicting beneficial rain in Brazil’s Center-South region, an area critical for the country’s sugar production, which alleviates worries about ongoing dryness. Climatempo forecasts further rain in this key region for the coming week.
Funds’ Long Positions and Brazil’s Production Rise
Concerns about excessive long positions by funds in London sugar could lead to additional selling pressure. According to the weekly Commitment of Traders (COT) report, funds raised their net-long positions in London sugar by 1,457 in the week ending November 5, reaching 44,261 net-long positions—this is the highest number since the data collection began in 2011.
Another bearish sign comes from Unica’s report on October 25, indicating that sugar output in Brazil’s Center-South region for the first half of October increased by 8% year-on-year to 2.443 million metric tons (MMT). Furthermore, cumulative sugar production in the region for the 2024/25 season also rose by 1.9% to 35.591 MMT as of mid-October. Recent updates from India’s sugar mills are also potentially affecting prices, as they requested government approval to export 2 million MT of sugar due to a surplus.
Fires and Drought Affect Brazil’s Crop Yields
Earlier drought and intense heat have led to devastating fires in Brazil. Reports indicate that 2,000 fire outbreaks have affected around 80,000 hectares of sugarcane in Sao Paulo, Brazil’s leading sugar-producing state. Green Pool Commodity Specialists estimate that up to 5 MMT of sugar cane may have been lost to these fires. In response to lower expected yields, the Brazilian government agency Conab revised its 2024/25 sugar production estimate from 42.7 MMT down to 42 MMT on August 22. Similarly, Rabobank lowered its estimate from 40.3 MMT to 39.3 MMT by September 20, while Datagro revised its outlook to 38.7 MMT earlier this week, citing drought effects and limited milling capacities.
India’s Monsoon Rains Fuel Sugar Production Outlook
Conversely, India has experienced positive monsoon rains that have raised expectations for a bumper sugar crop. The Indian Meteorological Department noted that India received 934.8 mm of rain during the monsoon season, surpassing the long-term average by 7.6%. As this season traditionally runs from June to September, such rainfall is poised to assist the sugar crop significantly.
Policy Changes and Global Production Estimates
In a decision that may support sugar prices, India’s Food Ministry lifted restrictions on sugar mill operations related to ethanol production for the 2024/25 year, which could prolong current export curbs. Since October 2023, India has imposed sugar export restrictions aimed at maintaining sufficient domestic supplies. The nation permitted only 6.1 MMT of exports during the 2022/23 season but forecasts indicate around 2 MMT available for export in the upcoming season.
Global Market Dynamics: Thailand’s Upsurge and Global Deficits
The Indian Sugar and Bio-energy Manufacturers Association (ISM) reported a 1.6% decline in India’s sugar production from October to April, producing 31.4 MMT. Projections for the 2024/25 season suggest a decline of 2% to 33.3 MMT. Meanwhile, Thailand’s sugar production is projected to jump 18% in the upcoming season, reaching 10.35 MMT, reinforcing its role as a major player in the global sugar market.
Providing a contrasting viewpoint, the International Sugar Organization forecasted a global sugar deficit of 3.58 MMT for the 2024/25 season, in contrast to a mild deficit of 200,000 MT for 2023/24. The USDA also suggests a potential record in global sugar production, pegging it at 186.024 MMT for the 2024/25 season, with consumption expected to rise to 178.788 MMT.
For more updates on the sugar market, stay tuned.
On the date of publication, Rich Asplund did not hold positions in any mentioned securities. The information provided is meant for informational purposes only. For further details, please refer to the Barchart Disclosure Policy.
The views and opinions expressed herein do not necessarily reflect those of Nasdaq, Inc.
