Sugar Prices Face Volatility Amid Supply and Demand Dynamics

May NY world sugar #11 (SBK25) is down -0.03 (-0.17%) today, while August London ICE white sugar #5 (SWQ25) has decreased by -2.90 (-0.57%).

After an early advance, sugar prices turned lower as declining crude oil prices prompted long liquidation in the sugar market. Today’s 3% drop in WTI crude oil (CLM5) is likely to weaken ethanol prices, potentially leading global sugar mills to focus more on sugar production instead of ethanol, thus increasing sugar supplies.

Initially, sugar prices rose, spurred by strength in the Brazilian real (^USDBRL), which climbed to a 2-1/2 week high against the dollar. This rise discouraged Brazil’s sugar producers from selling exports.

There was also positive carryover from last Thursday due to the Indian Sugar and Bio-Energy Manufacturers Association (ISMA) reporting a decrease in India’s sugar output. From October 1 to April 15, India’s sugar production reached 25.5 million metric tons (MMT), a decline of 18% compared to the same timeframe last year.

Last week, sugar prices were under pressure, with NY sugar reaching a 2-1/2 year nearest-futures low on Tuesday and London sugar hitting a 3-month low the following day. The forecast for substantial rainfall in India, which may lead to a bumper sugar crop, is dampening sugar prices. India’s Ministry of Earth Sciences projected an above-normal monsoon this year, anticipating total rainfall to be 105% of the long-term average during the monsoon season from June through September.

Concerns over the global trade war are also weighing on sugar prices, as potential tariffs could raise costs for consumers and dampen demand.

Additionally, on the bearish side, consultant Datagro forecasted on March 12 that Brazil’s Center-South sugar production for 2025/26 will increase by 6% year-over-year to 42.4 MMT. Green Pool Commodity Specialists also projected a shift in the worldwide sugar market to a surplus of 2.7 MMT in the 2025/26 crop year from a deficit of 3.7 MMT in 2024/25.

On January 20, the Indian government indicated it would permit sugar mills to export 1 MMT of sugar this season, easing previous restrictions placed on sugar exports since October 2023. India had allowed only 6.1 MMT of sugar exports during the 2022/23 season to maintain sufficient domestic supplies, after allowing a record 11.1 MMT in the preceding season. However, the ISMA projects that India’s 2024/25 sugar production will tumble by 17.5% year-over-year, reaching a five-year low of 26.4 MMT.

Meanwhile, the outlook for increased sugar production in Thailand presents additional bearish pressure on sugar prices. Thailand’s Office of the Cane and Sugar Board recently reported a 14% year-over-year rise in sugar production for 2024/25, reaching 10 MMT. Thailand is recognized as the world’s third-largest sugar producer and the second-largest sugar exporter.

Amid signs of lower global sugar production, supportive price effects are emerging. Unica reported last Monday that cumulative sugar output in Brazil’s Center-South for 2024/25 through March fell by 5.3% year-over-year to 40.169 MMT. Similarly, the ISMA reduced its 2024/25 sugar production forecast for India to 26.4 MMT from a prior estimate of 27.27 MMT, citing lower cane yields.

Further altering the market outlook, the International Sugar Organization (ISO) raised its 2024/25 global sugar deficit forecast to 4.88 MMT from 2.51 MMT, reflecting a tightening market compared to the 2023/24 global sugar surplus of 1.31 MMT. The ISO also reduced its 2024/25 global sugar production forecast to 175.5 MMT, down from an earlier prediction of 179.1 MMT.

Drought and excessive heat last year caused significant damage to sugar crops in Brazil’s leading sugar-producing state, Sao Paulo. Green Pool Commodity Specialists indicated that up to 5 MMT of sugar cane might have been lost due to these fires. According to Brazil’s government crop forecasting agency, Conab, sugar production for 2024/25 is projected to decline by 3.4% year-over-year to 44.118 MMT, driven by lower sugarcane yields due to adverse weather conditions.

The USDA, in its bi-annual report released on November 21, projected that global sugar production for 2024/25 will rise by 1.5% year-over-year to a record 186.619 MMT. Furthermore, human sugar consumption is expected to climb by 1.2% year-over-year, hitting a record 179.63 MMT, while 2024/25 global sugar ending stocks are forecasted to decrease by 6.1% 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 are solely for informational purposes. For more information, please view the Barchart Disclosure Policy here.

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