Sugar Prices Retreat Amid Mixed Global Factors
Market Overview
March NY world sugar #11 (SBH25) today is down -0.45 (-2.04%), and March London ICE white sugar #5 (SWH25) is down -10.70 (-1.88%).
Sugar prices are experiencing moderate losses today as a stronger dollar (DXY00) prompted the liquidation of sugar futures.
Recent Sugar Production Insights
On Tuesday, sugar prices climbed to 1-1/2 week highs after Wilmar International projected that the number of sugar mills closed in Brazil, currently at 38, will more than triple this month. This closure is expected to drastically minimize sugar output in the country. During the wet months of December and January, Brazilian mills generally halt cane processing but can resume in March, depending on weather conditions. However, heavy rains have caused some mills to close ahead of schedule.
Thailand’s Impact on the Market
The forecast for increased sugar production in Thailand could put downward pressure on prices. On October 29, Thailand’s Office of the Cane and Sugar Board estimated that sugar production for 2024/25 will rise by +18% year-over-year to 10.35 MMT, up from 8.77 MMT in the previous season. Being the world’s third-largest sugar producer and second-largest exporter, Thailand’s output is critical to global sugar dynamics.
India’s Monsoon Effect
The optimistic expectations for a strong sugar crop in India, backed by above-average monsoon rains, may also weigh down prices. The Indian Meteorological Department reported that India received 934.8 mm of rain during the current monsoon season as of September 30, which is the highest in four years and 7.6% above the long-term average of 868.6 mm.
Brazil’s Sugar Output Reliability
Supporting sugar prices, Unica’s recent report showed a significant decline in Brazil’s Center-South sugar output during the second half of October, which fell by -24.3% year-over-year to 1.785 MMT. However, total sugar output from the region from the start of the season through October rose by +0.3% year-over-year to 37 MMT.
Recent Natural Disasters Impacting Production
Drought and excessive heat conditions this year have sparked fires in Brazil’s leading sugar-producing state, Sao Paulo. Orplana, a sugar cane industry group, reported around 2,000 fires have impacted as much as 80,000 hectares of sugarcane. Green Pool Commodity Specialists estimate a loss of up to 5 MMT of sugar cane due to these events. In light of these developments, Conab decreased its forecast for Brazil’s Center-South sugar production for 2024/25 from 42.7 MMT to 42 MMT. Similarly, Rabobank revised its projection down from 40.3 MMT to 39.3 MMT, citing dry conditions. Datagro also reduced its estimate to 38.7 MMT from 39.3 MMT, focusing on the drought’s impact and limited processing capacity.
India’s Export Policies
On a supportive note for sugar prices, India’s Food Ministry lifted restrictions on ethanol production by sugar mills for the 2024/25 season, which may extend the country’s sugar export limitations. In December, India had ordered mills to cease ethanol production from sugarcane for the 2023/24 season to bolster sugar reserves. Since October 2022, India has limited sugar exports to ensure stable domestic supply, allowing only 6.1 MMT during the 2022/23 season compared to a record 11.1 MMT the prior season. Nonetheless, the Indian Sugar and Bio-energy Manufacturers Association expressed hope on October 3 for the government to allow 2 MMT in exports next season.
Global Production Forecasts
On May 23, the USDA forecasted global sugar production will increase by +1.4% year-over-year to a record 186.024 MMT for 2024/25, with consumption expected to rise by +0.8% to 178.788 MMT. They also predicted that ending stocks will decline by -4.7% to a 13-year low of 38.339 MMT. Meanwhile, the International Sugar Organization on August 30 projected a global sugar deficit of -3.58 MMT for 2024/25, contrasting with a much smaller deficit of -200,000 MT for 2023/24.
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 are solely for informational purposes. For more information, please view 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.
