Sugar Prices Plummet Amid Market Pressures and Weather Factors

On Wednesday, March NY world sugar #11 (SBH25) fell by -0.18 to close at a decrease of -0.84%. Simultaneously, December London ICE white sugar #5 (SWZ24) dropped by -4.80, reflecting a decline of -0.88%.

Declining Prices Set a New Low

This week’s market has seen a continuation of losses, with sugar prices reaching 1-3/4 month lows. A surge in the dollar index (DXY00) to its highest point in a year pressured sugar prices further. The situation worsened for London sugar as it traded below its 200-day moving average, triggering additional technical selling.

Potential Liquidation in London Sugar Market

Currently, funds hold a significant long position in London sugar, with last Friday’s Commitment of Traders (COT) report indicating a 1,457 net-long position increase, bringing the total to 44,261—marking the highest since records began in 2011. This could lead to a round of long liquidation that might amplify any price decline.

Thailand’s Production Expected to Rise

Bearish news for sugar prices comes from Thailand, where the Office of the Cane and Sugar Board predicts a substantial 18% year-on-year increase in sugar production for 2024/25, projecting totals of 10.35 million metric tons (MMT). In the previous 2023/24 season, Thailand produced 8.77 MMT of sugar. Thailand ranks as the third-largest sugar producer and second-largest exporter globally.

Concerns Over India’s Bumper Crop

In addition, the Indian Meteorological Department reports above-average monsoon rains, totaling 934.8 mm as of September 30—7.6% higher than the long-term average of 868.6 mm. This could result in a bountiful sugar crop, adding further pressure to prices.

Brazil’s Sugar Production Faces Challenges

A positive note for sugar prices emerged from Brazil, where a recent Unica report detailed a 24.3% year-on-year decrease in sugar output from the Center-South region during the latter half of October, totaling 1.785 MMT. However, cumulative sugar production for 2024/25 through October has slightly increased by 0.3% year on year to 37 MMT.

Recent drought and rising temperatures have led to fires that devastated sugar crops in Brazil’s largest sugar-producing state, São Paulo. Reports indicate up to 2,000 fire outbreaks impacted approximately 80,000 hectares of sugarcane. Analysts at Green Pool Commodity Specialists estimate a loss of up to 5 MMT of sugarcane due to these fires. Consequently, Brazil’s government forecasting agency Conab revised its 2024/25 sugar production estimate downward to 42 MMT from an earlier forecast of 42.7 MMT. Rabobank also adjusted its 2024/25 predictions, lowering estimates from 40.3 MMT to 39.3 MMT due to drought conditions.

India’s Export Restrictions Remain

On a supportive note for prices, the Indian Food Ministry has lifted previous restrictions on sugar mills producing ethanol for the upcoming supply year starting November. This move may extend India’s sugar export limitations. Since October 2023, India has imposed strict limits on sugar exports to maintain domestic supplies. For the 2022/23 season, exports were limited to 6.1 MMT after a record 11.1 MMT the previous season. Recent statements from the Indian Sugar and Bio-energy Manufacturers Association suggest India could have 2 MMT of sugar available for export next season, calling for the government to revise its restrictions.

Additionally, the ISM reported a 1.6% year-on-year decrease in India’s sugar production from October to April, totaling 31.4 MMT. Projections for 2024/25 indicate a further decline of 2% to 33.3 MMT. The ISM also forecasts that India’s sugar reserves will stand at 8.4 MMT as of September 30, down from an earlier estimate of 9.1 MMT.

Global Production and Consumption Trends

The International Sugar Organization (ISO) has projected a global sugar deficit of 3.58 MMT for 2024/25, significantly larger than the estimated 200,000 metric ton deficit for the current supply year. Global sugar production is estimated to be 179.3 MMT, marking a decrease of 1.1% from 181.3 MMT in 2023/24.

The USDA’s May bi-annual report anticipates a 1.4% increase in global sugar production for 2024/25, reaching a record 186.024 MMT, alongside a 0.8% increase in human consumption to 178.788 MMT. However, the USDA forecasts a reduction in global ending stocks to 38.339 MMT, a drop of 4.7% from the previous year, marking the lowest level in 13 years.