April Sugar Prices Decline Amidst Demand Concerns and Market Dynamics

On Friday, May NY world sugar #11 (SBK25) closed down -0.12 (-0.66%), while May London ICE white sugar #5 (SWK25) fell -0.90 (-0.17%). Sugar prices retraced from an early advance, resulting in moderate losses driven by concerns over demand.

This decline followed a drop earlier in the week, where NY sugar hit a 5-week low and London sugar fell to a 2-month low. The worsening of the global trade situation has raised fears that higher tariffs—such as China’s increase to 125% from 84% on US goods—may lead to decreased sugar demand. The initial spike in sugar prices on Friday was attributed to the dollar index (DXY00) sinking to a 3-year low, which typically boosts commodity prices.

Crude Oil’s Impact on Sugar Production

Wednesday’s decline in WTI crude oil (CLK25) to a 4-year low also cast a shadow on sugar prices. Lower crude oil values undercut ethanol prices, potentially incentivizing sugar mills worldwide to shift focus from ethanol production back to sugar production. This redirection could lead to increased sugar supplies, complicating the price outlook.

Concerns Over Global Sugar Production

Evidence of decreasing global sugar production continues to offer support for prices. The Indian Sugar and Bio-energy Manufacturers Association reduced its 2024/25 sugar production forecast for India to 26.4 million metric tons (MMT) from January’s estimate of 27.27 MMT due to reported declines in cane yields. Additionally, Unica revealed that Brazil’s cumulative sugar output for the 2024/25 season fell by 5.3% year-over-year to 39.983 MMT as of mid-March. Meanwhile, Czarnikow adjusted Brazil’s 2025/26 sugar production estimate down to 42 MMT from 43.6 MMT in February.

Global Sugar Deficit Signal

The International Sugar Organization (ISO) raised its 2024/25 global sugar deficit forecast to -4.88 MMT from -2.51 MMT noted in November, indicating a tightening market after the previous season’s surplus of 1.31 MMT. The ISO also revised its global sugar production forecast downward to 175.5 MMT, down from 179.1 MMT previously.

Factors Contributing to Future Surpluses

However, not all signs are bearish. Datagro predicts that the Brazilian Center-South sugar production for 2025/26 will increase by 6% to 42.4 MMT. Similarly, Green Pool Commodity Specialists foresee a shift to a surplus in the global sugar market, with a projection of +2.7 MMT for the 2025/26 crop year, compared to a deficit of -3.7 MMT in 2024/25.

Export Policies and Production Outlooks

An easing of restrictions in India could add pressure to sugar prices. On January 20, the Indian government announced that sugar mills would be permitted to export 1 MMT this season, lifting the limitations imposed since October 2023. Historically, India exported only 6.1 MMT during the 2022/23 season, down from a peak of 11.1 MMT the prior season. The Indian Sugar Mills Association (ISMA) now anticipates a significant production drop of 17.5% year-over-year to a five-year low of 26.4 MMT for the 2024/25 season.

Potential Recovery in Thailand

The outlook for Thailand’s sugar production is more optimistic, expected to jump by 18% year-over-year to 10.35 MMT in the 2024/25 season, following 8.77 MMT produced during the 2023/24 season. As the world’s third-largest sugar producer, Thailand’s increase could further shape the global market dynamics.

Brazilian Crop Challenges

Compounding the situation, several factors in Brazil have affected sugar production. Drought and heat-related fires last year have severely impacted crops in São Paulo, leading to losses estimated at 5 MMT of sugar cane. Brazil’s governmental forecasting body, Conab, adjusted its sugar production estimate for 2024/25 down to 44 MMT from a prior forecast of 46 MMT, attributing the decline to these adverse weather conditions.

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

On the date of publication, Rich Asplund did not have any positions in the securities mentioned in this article. All information and data in this article are solely for informational purposes. For additional information, please view the Barchart Disclosure Policy here.

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