Global Sugar Prices Decline Amid Market Instability and Production Forecasts

May NY world sugar #11 (SBK25) closed down -0.27 at -1.41%, while May London ICE white sugar #5 (SWK25) also fell, losing -5.50 (-1.01%) on Friday.

The decline in sugar prices marked a second consecutive day of losses, primarily driven by fears of a global trade war. This anxiety triggered a sell-off in equity markets, leading to a risk-off sentiment that pressured sugar prices lower. Additionally, a notable 7% drop in WTI crude oil (CLK25) to its lowest level in four years further impacted the sugar market. Decreased crude prices generally drive down ethanol prices, which could lead sugar mills to focus on sugar production instead of ethanol, potentially increasing sugar supplies.

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The weakening Brazilian real (^USDBRL) added to the downward momentum for sugar prices on Friday. The real fell to a three-week low against the dollar, which encouraged Brazilian sugar producers to increase exports.

On Monday, sugar prices fell to three-week lows following a report from Meteorologist Climatempo, which noted above-average rainfall in Brazil during the previous week, positively impacting the sugar crop.

Nevertheless, signs of reduced global sugar production offer support for sugar prices. On March 12, the Indian Sugar and Bio-energy Manufacturers Association lowered its 2024/25 sugar production forecast for India to 26.4 million metric tons (MMT), down from 27.27 MMT in January, citing lower cane yields. Additionally, last Thursday, Unica reported that Brazil’s cumulative sugar output for the 2024/25 season through mid-March decreased by 5.3% year-on-year to 39.983 MMT. Moreover, the sugar trading firm Czarnikow revised its Brazil 2025/26 sugar production estimate down to 42 MMT from a previous prediction of 43.6 MMT in February.

In a shift towards a tighter market, the International Sugar Organization (ISO) projected an increase in the global sugar deficit forecast for 2024/25 to -4.88 MMT, up from -2.51 MMT predicted in November. The ISO also revised its global sugar production forecast for 2024/25 down to 175.5 MMT from 179.1 MMT.

However, there are bearish factors to consider. The consultant Datagro anticipates that Brazil’s Center-South sugar production for 2025/26 will rise by 6% year-on-year to reach 42.4 MMT. Additionally, Green Pool Commodity Specialists expect a reversal in the market, projecting a surplus of +2.7 MMT for the 2025/26 crop year after estimating a deficit of -3.7 MMT for 2024/25.

A recent announcement from the Indian government allowed its sugar mills to export 1 MMT of sugar this season, easing previous restrictions imposed since October 2023 to maintain domestic supply levels. Last season, Indian mills were permitted to export only 6.1 MMT of sugar, compared to an all-time high of 11.1 MMT in the preceding year. Despite this easing, the India Sugar Mills Association (ISMA) predicts a 17.5% year-on-year drop in India’s 2024/25 sugar production to a five-year low of 26.4 MMT.

Concerns about rising sugar production in Thailand further contribute to bearish sentiments in the market. Thailand’s Office of the Cane and Sugar Board reported a projected 18% year-on-year increase in sugar production for 2024/25, with expectations to reach 10.35 MMT. This increase comes after Thailand produced 8.77 MMT in the 2023/24 season, reinforcing its status as the world’s third-largest sugar producer and second-largest exporter.

Last year, drought and excessive heat led to fires that severely damaged sugar crops in Brazil’s top producing state, São Paulo. Estimates suggest that up to 5 MMT of sugar cane may have been lost to these incidents. Consequently, Conab, Brazil’s government crop forecasting agency, revised its 2024/25 sugar production estimate down from 46 MMT to 44 MMT, attributing this reduction to lower sugarcane yields caused by drought and high temperatures.

According to the USDA’s bi-annual report released on November 21, global sugar production for 2024/25 is expected to grow by 1.5% year-on-year, reaching a record 186.619 MMT. Concurrently, global human sugar consumption is projected to rise by 1.2% to a record 179.63 MMT, while the USDA forecasts a 6.1% decline in global sugar ending stocks year-on-year, down to 45.427 MMT.

On the date of publication,
Rich Asplund
did not hold (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is for informational purposes only. For more information, please view the Barchart Disclosure Policy
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The views and opinions expressed herein are solely those of the author and do not necessarily reflect those of Nasdaq, Inc.