Sugar Prices Hit Low Amid Supply Changes and Export Restrictions
March NY world sugar #11 (SBH25) decreased by -0.20 (-1.02%) today, while March London ICE white sugar #5 (SWH25) remains inactive due to the UK’s Boxing Day holiday.
Current Market Trends
Today, NY sugar prices dropped to a 3-1/4 month low, primarily driven by comments from India’s Food Secretary, Chopra. He indicated that sugar exports might resume if a surplus occurs, following domestic ethanol blending requirements. Currently, the Indian government estimates a sugar surplus of approximately 1 million metric tons (MMT) for this season.
Global Supply Factors
Declining strength in the Brazilian real (^USDBRL) is further pressuring sugar prices by promoting exports from Brazil’s producers. The real is just above its record low against the dollar set last Thursday.
An optimistic global supply outlook also weighs on sugar prices. The International Sugar Organization (ISO) revised its 2024/25 global sugar deficit forecast to -2.51 MMT, a significant improvement from the -3.58 MMT projected in August. Additionally, ISO raised its 2023/24 global sugar surplus estimate to 1.31 MMT, up from the previous figure of 200,000 MT.
Production Trends in Major Countries
In Thailand, forecasts suggest a substantial increase in sugar production. The Office of the Cane and Sugar Board expects an 18% rise year-on-year, bringing production to 10.35 MMT in 2024/25. This follows Thailand’s production of 8.77 MMT for the season ending in April. As the world’s third-largest sugar producer, this increase may add pressure to sugar prices.
Conversely, reduced sugar output in India presents a supportive aspect for prices. The National Federation of India Cooperative Sugar Factories reported an 18% year-on-year decline in India’s sugar production, totaling 6.1 MMT between October 1 and December 15.
Meanwhile, sugar output from Brazil’s Center-South has also decreased. According to Unica, production through November for 2024/25 is down 3.7% year-on-year at 39.361 MMT.
Challenges Facing Brazil’s Sugar Sector
Earlier this year, drought and excessive heat resulted in widespread fires that damaged crops in Brazil’s leading sugar-producing state, Sao Paulo. The industry group Orplana reported that about 2,000 fire incidents impacted up to 80,000 hectares of sugarcane. Estimates suggest around 5 MMT of sugar cane may have been lost due to these fires. The Brazilian government’s crop forecasting agency, Conab, recently lowered its 2024/25 sugar production estimate from 46 MMT to 44 MMT, attributing this to lower yields from drought and heat.
India Export Policies Impact Prices
To support sugar prices, India’s Food Ministry lifted restrictions on sugar mills producing ethanol for the 2024/25 season starting November 30, which could extend restrictions on sugar exports. Last December, to ensure adequate domestic supplies, India stopped sugar mills from converting sugarcane into ethanol for the 2023/24 year. Exports were limited to 6.1 MMT in the 2022/23 season, a significant drop from the record 11.1 MMT permitted previously. However, the Indian Sugar and Bio-energy Manufacturers Association (ISM) reported that India would have 2 MMT of sugar available for export next season and has urged the government to lift the current export restrictions.
Moreover, the ISM projected a slight decline in India’s 2024/25 sugar production, forecasting a 2% decrease year-on-year to 33.3 MMT and estimating sugar reserves at 8.4 MMT on September 30 compared to an earlier estimate of 9.1 MMT in May.
Global Production Forecasts
The International Sugar Organization projects a slight decline in global sugar production for 2024/25, forecasting it at 179.3 MMT, down 1.1% from 181.3 MMT in 2023/24. In contrast, the USDA’s biannual report released on November 21 predicts an increase in global sugar production to a record 186.619 MMT for 2024/25, up 1.5% year-on-year, with human sugar consumption reaching 179.63 MMT, a 1.2% increase. The USDA also expects global ending stocks to decrease by 6.1% year-on-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 is solely for informational purposes. For more information please view the Barchart Disclosure Policy
here.
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