Sugar Prices Slide as Global Production Rises
Market Update: NY and London Sugar Hit New Lows
March NY world sugar #11 (SBH25) is currently down -0.43 (-2.36%), while March London ICE white sugar #5 (SWH25) has fallen -4.90 (-1.03%).
Ongoing Decline Fueled by Supply Outlook
Sugar prices have continued their downturn, reaching a five-month low for NY sugar and a three-and-a-third-year low for London sugar. An optimistic forecast for global sugar supply is driving these price reductions. Recently, India announced that its sugar mills would be allowed to export 1 million metric tons (MMT) this season, easing previous restrictions imposed in 2023. Since October 2023, India had limited sugar exports to secure domestic availability, resulting in only 6.1 MMT exported during the 2022/23 season, down from a record 11.1 MMT the year before.
ISO Adjusts Global Sugar Forecasts
On November 21, the International Sugar Organization (ISO) revised its global sugar deficit forecast for 2024/25 to -2.51 MMT, lower than the -3.58 MMT estimated in August. Additionally, the ISO updated its surplus estimate for 2023/24 to 1.31 MMT, a significant increase from the previous projection of 200,000 metric tons.
Thailand’s Production Surge Adds Pressure
In Thailand, expected improvements in sugar production may further challenge sugar prices. The Office of the Cane and Sugar Board forecasted an 18% year-on-year increase for the 2024/25 season, predicting production could rise to 10.35 MMT, up from 8.77 MMT in the 2023/24 season. As the world’s third-largest sugar producer and second-largest exporter, Thailand’s numbers significantly affect the global market.
Market Dynamics: Short Positions and Stockpile Adjustments
Commodity funds currently hold a substantial short position in sugar futures, indicating they anticipate falling prices. The latest Commitment of Traders (COT) report revealed that funds increased their net-short position in NY sugar by 47,005 contracts to a new five-year high of 106,045 short positions as of January 14. Similarly, London’s short positions rose by 9,627 contracts to 121,425, also a five-year high.
Challenges in India and Brazil’s Sugar Production
Despite pressures on prices, signs of declining sugar production in India may offer some support. The Indian Sugar and Bio-energy Manufacturers Association (ISM) reported a 15.5% year-on-year decrease in sugar production during the first quarter of the 2024/25 season, totaling 9.54 MMT. The ISM predicts a total production decline of 13.8% for the entire season, reaching a five-year low of 27.6 MMT.
Brazil’s sugar industry faced challenges last year due to drought and fires in Sao Paulo, its main sugar-producing region. Reports indicated that approximately 2,000 fire outbreaks affected 80,000 hectares of sugar cane, leading to an estimated loss of up to 5 MMT of sugar cane. Consequently, Brazil’s government crop forecasting agency, Conab, revised its production estimate for 2024/25 to 44 MMT from a prior forecast of 46 MMT due to anticipated lower yields.
Global Production and Consumption Forecasts
Regarding global trends, the ISO forecast on August 30 predicted a slight decrease in sugar production to 179.3 MMT for 2024/25, down 1.1% from 181.3 MMT in 2023/24. In contrast, the USDA’s report, released on November 21, projected an increase in global sugar production to a record 186.619 MMT, rising by 1.5% year-on-year, with consumption expected to reach 179.63 MMT, up 1.2%. The USDA also estimated that global ending stocks for 2024/25 would decrease by 6.1% to 45.427 MMT.
On the date of publication, Rich Asplund did not hold any direct or indirect positions in the securities mentioned. All information in this article is for informational purposes only. For more details, please view the Barchart Disclosure Policy here.
The opinions expressed in this article reflect those of the author and may not represent the views of Nasdaq, Inc.