Global Sugar Prices Dip Amid Surplus Forecasts and Production Changes
March Sugar Contracts Lower as Market Reacts to Supply Changes
March NY world sugar #11 (SBH25) fell by -0.25 (-1.36%), while March London ICE white sugar #5 (SWH25) decreased by -7.60 (-1.57%).
Today, sugar prices are slightly down, hovering just above the significant low points seen on Wednesday. Over the past three months, prices have generally declined due to an improved outlook for sugar supply. On Wednesday, NY sugar marked a 4-3/4 month low for nearest-futures, and London sugar reached a 3-1/3 year low. The International Sugar Organization (ISO) revised its global sugar deficit forecast for 2024/25 to -2.51 MMT, improving from the August estimate of -3.58 MMT. Additionally, ISO raised the 2023/24 global sugar surplus estimate to 1.31 MMT, up from 200,000 MT in August.
India’s Surplus Could Open Doors for Exports
On December 19, India’s Food Secretary Chopra indicated that India might permit sugar exports if a surplus is confirmed after fulfilling domestic ethanol blending requirements. The Indian government currently projects a sugar surplus of about 1 MMT this season.
Production Boost in Thailand Poses Further Challenges
Meanwhile, production estimates from Thailand could negatively impact sugar prices. According to the Office of the Cane and Sugar Board, Thailand’s sugar production for 2024/25 is expected to increase by 18% year-over-year to 10.35 MMT. The country produced 8.77 MMT in the previous season ending in April. Thailand is a major player in the sugar market, ranking as the world’s third-largest producer and second-largest exporter.
London Markets Face Unique Market Pressures
An excessively high short position by funds in London sugar may spark a short-covering rally. The latest Commitment of Traders (COT) report indicated that funds raised their net-short position in London sugar to a five-year high of 2,515 contracts, increasing by 2,322 in the week ending January 7.
India’s Production Decline Creates Export Concerns
Support for sugar prices may arise from signs of reduced sugar output in India, which is the world’s second-largest producer. The Indian Sugar and Bio-energy Manufacturers Association (ISM) reported that India’s sugar production from October 1 to December 31, 2024/25 is down 15.5% year-over-year to 9.54 MMT, potentially leading the government to maintain export restrictions and limit global sugar supply.
Weather Anomalies Continue to Impact Brazil
Brazil is experiencing ongoing challenges, with drought and excessive heat last year leading to fires that damaged sugar crops, particularly in São Paulo, Brazil’s main sugar-producing state. Reports estimate that nearly 2,000 fires impacted up to 80,000 hectares of sugarcane, with Green Pool Commodity Specialists estimating losses of around 5 MMT. Conab, Brazil’s crop forecasting agency, has adjusted its 2024/25 sugar production estimate down to 44 MMT from a previous projection of 46 MMT due to these weather-related issues. Unica reported a 5.4% year-over-year decline in cumulative sugar output in the Center-South region for 2024/25, totaling 39.78 MMT through December.
India’s Ethanol Policy May Extend Export Restrictions
On a more supportive note, India’s Food Ministry lifted restrictions on sugar mills producing ethanol for the 2024/25 year starting in November, which may prolong existing sugar export limits. Since October 2023, India has restricted sugar exports to maintain adequate domestic supplies, allowing only 6.1 MMT of sugar to be exported during the 2022/23 season. This is a significant drop from the record 11.1 MMT exported the previous season. However, the ISM mentioned that India would have 2 MMT of sugar available for export next season and recommended the government to reconsider the current restrictions.
Forecasts Suggest Mixed Outlook for Global Sugar Production
Furthermore, the ISM projected a -2% year-over-year decline in India’s sugar production for 2024/25 to 33.3 MMT. It also estimated that India’s 2023/24 sugar reserves would reach 8.4 MMT by September 30, down from the earlier estimate of 9.1 MMT.
Overall, the ISO’s forecast from August 30 indicated a decline in global sugar production for 2024/25 to 179.3 MMT, reflecting a -1.1% decrease from 181.3 MMT in 2023/24. The USDA also provided insights in its bi-annual report released on November 21, indicating a +1.5% year-over-year increase in global sugar production for 2024/25 to a record 186.619 MMT and a +1.2% rise in human sugar consumption to a new high of 179.63 MMT. The USDA also projected that global ending stocks for 2024/25 would decrease by -6.1% year-over-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.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
