Sugar Prices Rise to Weekly Highs Amid Market Dynamics

May NY world sugar #11 (SBK25) today increased by +0.18 (+0.93%), while May London ICE white sugar #5 (SWK25) climbed +6.20 (+1.14%).

Market Drivers: Dollar Weakness and Production Forecasts

Today’s rise in sugar prices marks a rebound to one-week highs, driven by a weaker dollar. The dollar index (DXY00) has dropped to a 1.5-week low, prompting short covering in sugar futures.

Recent Developments Affecting Prices

On Monday, sugar prices plummeted to three-week lows after Meteorologist Climatempo announced above-average rainfall in Brazil, bolstering the sugar crop. However, indications of declining global sugar production provide underlying support for prices.

Production Forecast Adjustments

On March 12, the Indian Sugar and Bio-energy Manufacturers Association reduced its 2024/25 sugar production forecast for India to 26.4 million metric tons (MMT), down from 27.27 MMT in January, citing lower cane yields. Additionally, Unica reported a 5.3% year-on-year decrease in Brazil’s cumulative sugar output for the Center-South region, dropping to 39.983 MMT as of mid-March.

Furthermore, sugar trader Czarnikow revised its Brazil 2025/26 sugar production estimate to 42 MMT from a previous forecast of 43.6 MMT made in February. In contrast, the International Sugar Organization (ISO), on March 6, increased its global sugar deficit forecast for 2024/25 to -4.88 MMT, up from a November estimate of -2.51 MMT. This reflects a tightening market compared to the 2023/24 global sugar surplus of 1.31 MMT. Additionally, the ISO lowered its global sugar production forecast to 175.5 MMT from 179.1 MMT previously.

Diverging Market Projections

Counter to these bearish trends, Datagro projected on March 12 that sugar production in Brazil’s Center-South region could increase by 6% year-on-year to 42.4 MMT for 2025/26. Similarly, Green Pool Commodity Specialists indicated that the global sugar market might shift to a surplus of 2.7 MMT in the 2025/26 crop year, compared to a deficit of 3.7 MMT for 2024/25.

Export Regulations and Local Production Concerns

A bearish factor for sugar prices emerged when the Indian government announced it would permit sugar mills to export 1 MMT this season, easing restrictions in place since October 2023. In the previous season, mills exported only 6.1 MMT, significantly lower than the record 11.1 MMT in 2021/22. The India Sugar Mills Association (ISMA) forecasts a decline of 17.5% in 2024/25 sugar production to 26.4 MMT, a five-year low.

Future Projections for Thailand

On the production front, Thailand’s outlook appears bearish for sugar prices. The Office of the Cane and Sugar Board projected an 18% year-on-year increase in output for 2024/25 to 10.35 MMT, up from 8.77 MMT in the previous season. As the world’s third-largest sugar producer and second-largest exporter, these figures will impact global supply dynamics.

Recent Challenges in Brazil’s Sugar Production

In Brazil, drought and excessive heat caused fires that harmed crops in the major sugar-producing state of São Paulo. Green Pool Commodity Specialists reported that approximately 5 MMT of sugar cane may have been lost due to these fires. Moreover, Conab, Brazil’s crop forecasting agency, revised its 2024/25 sugar production estimate to 44 MMT, down from 46 MMT, citing lower yields from these adverse conditions.

USDA Projections and Global Context

In its biannual report released on November 21, the USDA projected that global sugar production for 2024/25 would rise by 1.5% year-on-year, reaching a record 186.619 MMT. Human sugar consumption is expected to grow by 1.2% to a record 179.63 MMT. Additionally, the USDA forecasts that global sugar ending stocks will decline by 6.1% to 45.427 MMT.

On the date of publication, Rich Asplund did not hold any positions in the securities mentioned in this article. All information is provided solely for informational purposes. For further information, please consult the Barchart Disclosure Policy here.

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