Sugar Prices Hit New Lows Amid Global Production Changes
The sugar market experienced notable declines today, with March NY world sugar #11 (SBH25) decreasing by -0.18 (-0.93%) and March London ICE white sugar #5 (SWH25) falling by -4.70 (-0.92%).
Falling Prices Linked to Increased Supply Outlook
Currently, sugar prices are experiencing a downward trend, reaching a 3-1/2 month low for NY sugar and a 2-3/4 year low for London sugar. Over the past three months, the decline has been attributed to improved global supply estimates. The International Sugar Organization (ISO) revised its forecast for the 2024/25 global sugar deficit to -2.51 million metric tons (MMT), a significant change from its earlier estimate of -3.58 MMT made in August. Additionally, the ISO increased its projection for the 2023/24 global sugar surplus to 1.31 MMT, a boost from the previous forecast of +200,000 metric tons.
Thailand’s Sugar Production Projections Add to Market Pressure
Prospects for heightened sugar production in Thailand are putting further pressure on prices. On October 29, Thailand’s Office of the Cane and Sugar Board announced that sugar production for the 2024/25 season could rise by +18% year-on-year to 10.35 MMT, up from 8.77 MMT in the 2023/24 season, which ended in April. As the world’s third-largest sugar producer and the second-largest exporter, Thailand’s output is closely watched by market participants.
India’s Potential Sugar Exports and Domestic Surplus
India’s Food Secretary, Chopra, stated on December 19 that the country may permit sugar exports if a surplus exists after fulfilling domestic ethanol blending requirements. Currently, India estimates a sugar surplus of around 1 MMT for the season, which could influence global sugar supplies.
Currency Fluctuations and Crop Damage Impact Prices
Further complicating the sugar market, the Brazilian real (^USDBRL) is weak, encouraging Brazil’s sugar producers to sell more on the export market. The real remains above its record low against the dollar, recorded on December 18. This comes as drought and extreme heat earlier this year caused significant crop damage in São Paulo, Brazil’s top sugar-producing region. Orplana, the sugarcane industry group, reports that about 2,000 fire outbreaks have harmed up to 80,000 hectares of sugarcane, with estimates indicating a loss of around 5 MMT of sugarcane. Consequently, Brazil’s national crop forecasting agency, Conab, has lowered its 2024/25 sugar production estimate to 44 MMT from a previous 46 MMT due to reduced yields linked to the adverse weather conditions. A recent report from Unica indicated that cumulative sugar output in Brazil’s Center-South region is down -5.1% year-on-year to 39.711 MMT, with a notable reduction in operating sugar mills this month.
India’s Restrictions on Sugar Exports
In a potential boost for sugar prices, India’s Food Ministry lifted restrictions on sugar mills producing ethanol for the 2024/25 season, which starts in November. This decision may extend the existing sugar export curbs. Since last December, India has halted the use of sugarcane for ethanol to support its sugar reserves. Sugar exports have been limited since October 2023 to ensure sufficient domestic supply, with only 6.1 MMT allowed during the 2022/23 season, in contrast to a record 11.1 MMT in the previous season. However, the Indian Sugar and Bio-energy Manufacturers Association (ISM) suggested on October 3 that about 2 MMT might be available for export next season and encouraged the government to reconsider current restrictions.
Declining Production Estimates in India
Projected sugar production in India for the 2024/25 season is expected to decrease by -2% year-on-year to 33.3 MMT, according to the ISM on September 26. Additionally, the National Federation of India Cooperative Sugar Factories Ltd reported an -18% year-on-year decrease to 6.1 MMT in sugar production from October 1 to December 15.
Global Sugar Production Forecasts
The ISO anticipates a slight decrease in global production for 2024/25, forecasting 179.3 MMT, down -1.1% from 181.3 MMT in 2023/24. In contrast, the USDA’s bi-annual report from November 21 predicts a 1.5% increase in global sugar production to a record 186.619 MMT and a 1.2% rise in human sugar consumption to 179.63 MMT. Notably, the USDA also forecasts that global sugar ending stocks will drop by -6.1% year-on-year to 45.427 MMT.
On the date of publication, Rich Asplund did not hold any positions in the securities mentioned in this article. All information provided is intended for informational purposes only. For further details, please refer to the Barchart Disclosure Policy here.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
