Sugar Prices Drop Amid Tariff Concerns and Supply Estimates

On Thursday, May NY world sugar #11 (SBK25) closed down -0.48 (-2.45%), while May London ICE white sugar #5 (SWK25) dropped -9.10 (-1.65%).

Sugar prices fell sharply due to President Trump’s reciprocal tariffs, which created a risk-off sentiment across various asset markets and raised worries about overall commodity demand. Additionally, a significant -6% drop in WTI crude oil (CLK25) to a three-week low further pressured sugar prices. Lower crude prices typically weaken ethanol prices, potentially causing sugar mills worldwide to divert more cane toward sugar production rather than ethanol, which could increase sugar supplies.

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The Brazilian real (^USDBRL) helped to limit sugar losses on Thursday. The real surged to a 5.5-month high against the dollar, which curbed export selling from Brazilian sugar producers. Earlier in the week, sugar prices fell to three-week lows after Meteorologist Climatempo reported above-average rainfall in Brazil, which was beneficial for its sugar crop.

Despite the bearish factors, signs of lower global sugar production are currently supportive of prices. 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 an earlier forecast of 27.27 MMT due to lower cane yields. Last Thursday, Unica reported that Brazil’s cumulative 2024/25 sugar output through mid-March decreased by 5.3% year-on-year to 39.983 MMT. Furthermore, sugar trader Czarnikow revised its forecast for Brazil’s 2025/26 sugar production down to 42 MMT from a previous estimate of 43.6 MMT in February.

Additionally, the International Sugar Organization (ISO) raised its 2024/25 global sugar deficit forecast to -4.88 MMT from a November forecast of -2.51 MMT, indicating a tighter market compared to the 2023/24 global sugar surplus of 1.31 MMT. The ISO also cut its 2024/25 global sugar production forecast to 175.5 MMT from an earlier prediction of 179.1 MMT.

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

Moreover, the Indian government stated on January 20 that it would permit its sugar mills to export 1 MMT of sugar this season, easing previous export restrictions. Since October 2023, India had limited sugar exports to maintain domestic supplies, allowing only 6.1 MMT during the 2022/23 season, a reduction from 11.1 MMT the year prior. The India Sugar Mills Association (ISMA) projects that India’s sugar production for 2024/25 will decline by 17.5% year-on-year to a five-year low of 26.4 MMT.

In Thailand, higher sugar production forecasts may negatively impact global sugar prices. Thailand’s Office of the Cane and Sugar Board has projected a +18% year-on-year increase in sugar production for 2024/25 to 10.35 MMT compared to 8.77 MMT in 2023/24. As the world’s third-largest sugar producer and second-largest exporter, Thailand’s output is significant to market dynamics.

Brazil faced drought and excessive heat last year, resulting in fires that damaged sugar crops, particularly in the key production state of Sao Paulo. Green Pool Commodity Specialists estimate that up to 5 MMT of sugar cane may have been lost. As a result, Conab, Brazil’s government crop forecasting agency, adjusted its forecast for the 2024/25 Brazil sugar production downward to 44 MMT from 46 MMT due to lower sugarcane yields caused by last year’s adverse conditions.

The USDA’s bi-annual report released on November 21 projected that global sugar production for 2024/25 would rise by 1.5% year-on-year to a record 186.619 MMT, while global human sugar consumption would increase by 1.2% year-on-year to 179.63 MMT. The USDA also anticipated that global sugar ending stocks would decline by 6.1% year-on-year 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.

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