Global Sugar Prices Slip Amid Production Insights
On Tuesday, March New York world sugar #11 (SBH25) ended at -0.18 (-0.81%), while March London ICE white sugar #5 (SWH25) closed down -4.80 (-0.84%).
Market Factors: Thai Output Impact
Sugar prices dropped from recent highs due to rising expectations for increased sugar production in Thailand. This development could offset possible shortages stemming from the seasonal shutdown of mills in Brazil. It appears that the global sugar supply will remain stable, despite recent concerns.
Brazil’s Sugar Production: A Mixed Bag
Earlier this week, increased speculation surrounded Brazil’s sugar mills. Currently, there are 38 mills closed, and predictions suggest that this number may triple this month, significantly affecting sugar output. Typically, mills halt cane processing during Brazil’s wetter months of December and January. However, this year, heavy rains have led to earlier shutdowns.
Thailand’s Growing Contribution
The forecast from Thailand’s Office of the Cane and Sugar Board indicated an impressive increase in sugar production. For the 2024/25 season, they expect output to rise by 18% year-over-year to 10.35 million metric tons (MMT), up from 8.77 MMT in the previous year. Thailand holds its place as the world’s third-largest sugar producer and the second-largest exporter.
India’s Monsoon and Its Effects
Encouraging weather trends in India could also influence sugar prices negatively. The Indian Meteorological Department reported 934.8 mm of rainfall during the monsoon season up to September 30, marking a 7.6% increase over the long-term average. A beneficial monsoon typically leads to larger sugar crops in India.
Brazil’s Production Challenges
Brazil faces troubling conditions affecting its sugar production. Recent droughts and excessive heat have sparked fires damaging sugar crops, particularly in São Paulo. Reports suggest that around 2,000 fire outbreaks have impacted up to 80,000 hectares, with estimates indicating a loss of up to 5 MMT of sugarcane. Consequently, Brazil’s crop forecasting agency, Conab, revised its sugar production estimate for the 2024/25 season from 42.7 MMT to 42 MMT, while Rabobank and Datagro made similar downward adjustments.
Supportive Measures from India
Amid these challenges, India’s Food Ministry has lifted restrictions on sugar mills producing ethanol for the upcoming 2024/25 year. This move is seen as a way to extend sugar export controls to help maintain domestic supply. Since October 2023, India has imposed export limits, allowing only 6.1 MMT of sugar to be shipped during the 2022/23 season, down from a record 11.1 MMT prior.
Production Trends in India
Reports from the Indian Sugar and Bio-energy Manufacturers Association (ISM) revealed a 1.6% decline in sugar production from October 2023 to April 2024. Looking ahead, they project another reduction of 2% for the 2024/25 season, with anticipated reserves standing at 8.4 MMT as of September 30.
Global Sugar Market Outlook
The International Sugar Organization (ISO) has forecast a global sugar deficit for 2024/25 of -3.58 MMT, significantly larger than the estimated -200,000 MT deficit for the current year. They expect global production to decrease to 179.3 MMT, down 1.1% from the previous year.
USDA Forecast Highlights
The United States Department of Agriculture (USDA), in a report released on May 23, has a contrasting view. They expect global sugar production to rise by 1.4% year-over-year, predicting record output at 186.024 MMT. Consumption is also expected to grow by 0.8%, leading to a reduction in ending stocks to a 13-year low of 38.339 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.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
