Sugar Prices Experience Setbacks Amid Supply Adjustments
March NY world sugar #11 (SBH25) has dropped by -0.12 (-0.56%), while March London ICE white sugar #5 (SWH25) fell -3.70 (-0.67%).
Today’s Price Movement
Sugar prices are facing moderate losses today but are still managing to stay above the significant lows recorded on Monday. This week, NY sugar reached a low not seen in 2 and a half months, while London sugar hit a 3-week low. An increase in sugar supplies is driving prices down. On November 21, the International Sugar Organization (ISO) updated its forecast, predicting a global sugar deficit for 2024/25 at -2.51 MMT, an improvement from the August estimate of -3.58 MMT. Additionally, the ISO revised its 2023/24 global sugar surplus estimate up to 1.31 MMT from the prior prediction of +200,000 MT.
Weak Currency Pressures Prices
A decline in the Brazilian real (^USDBRL) is further pressuring sugar prices. Last Friday, the real fell to a record low against the dollar, which usually promotes increased sugar exports from Brazil.
Production Declines in Brazil
On a brighter note for price support, sugar production in Brazil’s Center-South region decreased sharply. Unica reported a staggering -59.2% year-over-year drop in sugar output during the first half of November to just 898 MT. Overall, the cumulative sugar output for the 2024/25 season in this region has fallen -3.0% year-on-year to 38.274 MMT.
Earlier this year, severe drought and heat caused widespread fires in Brazil’s top sugar-producing region, São Paulo, leading to significant crop damage. The industry group Orplana reported that around 2,000 fire outbreaks affected nearly 80,000 hectares of sugarcane. Green Pool Commodity Specialists estimated that up to 5 MMT of sugarcane may have been lost due to these incidents. Consequently, Brazil’s government forecasting agency, Conab, revised its production estimate for next year down to 44 MMT from an earlier 46 MMT, citing lower yields caused by adverse weather.
Thailand’s Production Boost Affects Market
In contrast, there are concerns regarding rising sugar production in Thailand, which could further impact prices. Thailand’s Office of the Cane and Sugar Board has forecasted an 18% increase in sugar production for the 2024/25 season, reaching 10.35 MMT, up from 8.77 MMT in 2023/24. As the world’s third-largest sugar producer, Thailand’s increased output may shift the market dynamics.
India’s Export Restrictions
On a supportive note, India’s Food Ministry recently lifted restrictions on sugar mills producing ethanol for the 2024/25 year. This decision may extend India’s curbs on sugar exports. Since October 2023, India has limited sugar exports to secure domestic supplies, allowing only 6.1 MMT in the 2022/23 season after a record 11.1 MMT in the preceding year. The Indian Sugar and Bio-energy Manufacturers Association (ISM) indicated on October 3 that India might have 2 MMT of sugar available for export next season and urged the government to reconsider current export limits.
Production and Supply Forecasts for India
India’s ISM reported that for the 2023/24 season from October to April, sugar production fell -1.6% year-on-year to 31.4 MMT. For the upcoming 2024/25 year, they project a further -2% decrease in production to 33.3 MMT, while also lowering India’s sugar reserves estimate for September 30 to 8.4 MMT from an earlier forecast of 9.1 MMT.
Global Production Insights
In a broader context, the ISO forecasted a slight drop in global sugar production for 2024/25 to 179.3 MMT, down -1.1% from 181.3 MMT in 2023/24. Conversely, the USDA’s biannual report released on November 21 projected a +1.5% increase in global production to a record 186.619 MMT for 2024/25, coinciding with a +1.2% rise in human sugar consumption to reach 179.63 MMT. Ending stocks are expected to decline by -6.1% year-on-year to 45.427 MMT.
As of publication, Rich Asplund does not have any positions in the securities mentioned in this article. Information and data provided are solely for informational purposes. For more details, please view the Barchart Disclosure Policy here.
The views and opinions expressed herein are those of the author and do not necessarily reflect the views of Nasdaq, Inc.
