Global Sugar Prices See Decline Amid Shifting Forecasts
Market Reaction to Lowered Deficit Estimates and Export Dynamics
March NY world sugar #11 (SBH25) closed down -0.27 (-1.25%) on Thursday, while March London ICE white sugar #5 (SWH25) fell by -5.50 (-0.98%).
On Thursday, sugar prices dropped following the International Sugar Organization’s (ISO) updated forecast for the 2024/25 global sugar deficit, which was revised to -2.51 MMT from -3.58 MMT reported in August. Meanwhile, the ISO adjusted its 2023/24 global sugar surplus estimate to 1.31 MMT from an earlier projection of +200,000 MT. The decline in sugar prices was intensified by a fall in the Brazilian real (^USDBRL) to a two-week low against the dollar, which prompted increased selling by Brazilian sugar producers.
Earlier in the week, sugar prices had surged to two-week highs due to Wilmar International’s projections indicating that the number of sugar mills closed in Brazil, currently at 38, could more than triple this month. This significant reduction in operations was expected to sharply cut Brazil’s sugar output. Sugar mills generally halt cane processing during the rainy months of December and January, resuming as early as March, contingent on favorable weather. However, heavy rains occurring earlier this month resulted in mills closing sooner than anticipated.
Growing Global Production Challenges Prices
The forecast for increased sugar production in Thailand also weighs heavily on market prices. On October 29, Thailand’s Office of the Cane and Sugar Board estimated that the country’s sugar production for 2024/25 would rise by +18% year-on-year to 10.35 MMT, up from 8.77 MMT in the 2023/24 season ending in April. As the world’s third-largest sugar producer, Thailand’s output is crucial in shaping market dynamics.
Additionally, strong monsoon rains in India have raised expectations for a bumper sugar crop, which is not favorable for prices. The Indian Meteorological Department reported that, as of September 30, the monsoon season brought 934.8 mm of rainfall, the highest in four years and 7.6% above the long-term average of 868.6 mm. The monsoon season lasts from June through September.
Weather and Market Reports Impacting Brazil
A report from Unica last Tuesday supported sugar prices, revealing that sugar production in Brazil’s Center-South region had dropped -24.3% year-on-year to 1.785 MMT during the second half of October. Nevertheless, the cumulative sugar output for 2024/25 in the Center-South region increased by +0.3% year-on-year to 37 MMT.
Meanwhile, drought and excessive heat have sparked fires in Brazil, damaging crops in Sao Paulo, the country’s top sugar-producing state. The industry group Orplana reported up to 2,000 fire outbreaks affecting approximately 80,000 hectares of sugarcane. Green Pool Commodity Specialists estimate that 5 MMT of sugarcane might have been lost due to these fires. Brazil’s government crop forecasting agency, Conab, reduced its overall 2024/25 sugar production estimate to 42 MMT from a previous forecast of 42.7 MMT due to lower yields caused by adverse weather. Similarly, Rabobank and Datagro both adjusted their forecasts downward, citing ongoing dryness and limited processing capacity.
Policy Changes and Production Outlook
A potential support factor for sugar prices emerged when India’s Food Ministry lifted restrictions on sugar mills producing ethanol for the upcoming 2024/25 year beginning in November, possibly extending India’s sugar export limitations. In December, India had imposed a temporary halt on mills using sugarcane for ethanol production to bolster sugar reserves. Since October 2023, the country has restricted sugar exports to ensure adequate domestic supplies, allowing only 6.1 MMT during the 2022/23 season, a significant decrease from the record 11.1 MMT exported previously.
The Indian Sugar and Bio-energy Manufacturers Association (ISM) noted a -1.6% decline in India’s sugar production from October to April, reaching 31.4 MMT this year. The ISM further projected a -2% decline in production for 2024/25 to 33.3 MMT, alongside reduced sugar reserves, anticipated to hit 8.4 MMT by September 30.
In a contrasting view, the ISO has forecasted a -1.1% reduction in global sugar production for 2024/25, predicting a total of 179.3 MMT, compared to 181.3 MMT in 2023/24.
The USDA’s bi-annual report released on May 23 anticipated a +1.4% rise in global sugar production for 2024/25, expected to reach a record 186.024 MMT, while human sugar consumption is set to increase by +0.8% to a record 178.788 MMT. The USDA also noted a decrease in global sugar ending stocks to 38.339 MMT, a 13-year low.
On the date of publication, Rich Asplund did not hold positions in any of the securities mentioned in this article. All information and data provided are for informational purposes. For additional disclosure information, please view the Barchart Disclosure Policy here.
The views expressed in this article are solely those of the author and do not necessarily reflect the views of Nasdaq, Inc.
