Sugar Prices Decline Amid Market Pressures and Production Insights

May NY world sugar #11 (SBK25) is down -0.44 (-2.25%), while May London ICE white sugar #5 (SWK25) has decreased -8.60 (-1.56%).

Market Influences on Sugar Prices

Sugar prices are experiencing a moderate decline today, largely due to President Trump’s reciprocal tariffs, which have created a risk-off sentiment among investors across multiple asset classes. Additionally, today’s 7% drop in WTI crude oil (CLK25) to a three-week low is impacting sugar prices as well. Falling crude prices negatively affect ethanol prices, which may lead sugar mills globally to shift more focus toward sugar production instead of ethanol, ultimately increasing sugar supplies.

Support Factors for Sugar Prices

Despite the overall downward trend, sugar losses are tempered by a strong Brazilian real (^USDBRL), which has surged to a 5.5-month high against the dollar. This currency strength discourages Brazilian sugar producers from selling their exports. Notably, on Monday, sugar prices dropped to three-week lows following a report by Meteorologist Climatempo indicating above-average rainfall in Brazil, which is beneficial for the sugar crop.

Global Production Developments

Recent indicators suggest lower global sugar production, which supports price stability. For instance, the Indian Sugar and Bio-energy Manufacturers Association recently revised its 2024/25 India sugar production forecast down to 26.4 MMT from 27.27 MMT in January, citing lower cane yields. Similarly, Unica reported a 5.3% year-over-year decline in cumulative 2024/25 Brazil Center-South sugar output to 39.983 MMT by mid-March. Additionally, sugar trader Czarnikow adjusted its Brazil 2025/26 sugar production estimate down to 42 MMT from 43.6 MMT in February.

The International Sugar Organization (ISO) has also revised its outlook, raising the 2024/25 global sugar deficit forecast to -4.88 MMT, compared to a prior forecast of -2.51 MMT. This adjustment reflects a tightening market after the 2023/24 global sugar surplus of 1.31 MMT. Moreover, the ISO has lowered its 2024/25 global sugar production forecast to 175.5 MMT from 179.1 MMT last November.

Bearish Outlooks on Sugar Production

On the bearish side, consultant Datagro predicts that Brazil’s Center-South sugar production will increase by 6% year-over-year in 2025/26, reaching 42.4 MMT. Furthermore, Green Pool Commodity Specialists projected that the global sugar market would shift to a surplus of 2.7 MMT in the 2025/26 crop year after estimating a deficit of 3.7 MMT in 2024/25.

Contributing to this bearish sentiment, the Indian government announced on January 20 that it would permit its sugar mills to export 1 MMT of sugar during this season, easing previous export restrictions. This follows a period starting in October 2023 when exports were limited to maintain local supply levels. Last season, India allowed only 6.1 MMT of sugar exports, contrasted with a record 11.1 MMT the previous year. However, the Indian Sugar Mills Association (ISMA) anticipates a significant -17.5% year-over-year drop in sugar production, projecting a five-year low of 26.4 MMT for 2024/25.

Regional Production Challenges and Expectations

In Thailand, a forecast of increased sugar production serves as an additional bearish factor for sugar prices. On October 29, Thailand’s Office of the Cane and Sugar Board predicted a remarkable 18% year-over-year rise in sugar production for 2024/25, estimating it at 10.35 MMT, up from 8.77 MMT in the 2023/24 season. As the world’s third-largest sugar producer and second-largest exporter, Thailand’s output shifts could significantly impact global markets.

Brazil has faced challenges, as drought and excessive heat last year led to fires damaging crops in its primary sugar-producing state of Sao Paulo. Green Pool Commodity Specialists indicated that this disaster may have resulted in the loss of up to 5 MMT of sugarcane. Consequently, Conab, Brazil’s government crop forecasting agency, has reduced its 2024/25 sugar production estimates from 46 MMT to 44 MMT, attributing this to lower sugarcane yields stemming from adverse weather conditions.

USDA Forecasts and Market Consumption

According to the USDA’s bi-annual report released on November 21, global sugar production for 2024/25 is expected to rise by 1.5% year-over-year, reaching a record 186.619 MMT. In contrast, global human sugar consumption is projected to increase by 1.2% year-over-year to a record 179.63 MMT. The USDA also forecasts that global sugar ending stocks will decline by 6.1% year-over-year, totaling 45.427 MMT.

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

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