March Sugar Futures Rebound Amid Mixed Global Production Forecasts

Sugar Prices Show Slight Increase Post-Week Low

March NY world sugar #11 (SBH25) today is up +0.11 (+0.50%), and December London ICE white sugar #5 (SWZ24) is up +3.90 (+0.70%).

Sugar prices have picked up slightly today, recovering from Monday’s one-week low. The recent demand from India’s Sugar Mills for government approval to immediately export 2 million metric tons (MT) of sugar has impacted the market, as India currently faces a surplus.

Weather Patterns May Affect Brazil’s Sugar Yield

Rain is forecasted in Brazil’s Center-South this week, which could improve conditions after recent droughts and is considered bearish for sugar prices. Meteorologist Climatempo has indicated that this rainfall will help stabilize temperatures and enhance soil moisture levels.

Last Friday, Unica revealed that sugar production in Brazil’s Center-South during the first half of October increased by +8% year-over-year to 2.443 million metric tons (MMT). Additionally, cumulative production through the first half of October for the 2024/25 crop year rose +1.9% to 35.591 MMT.

Traders’ Positions Spark Potential Price Fluctuations

Concerns about an excessive long position by funds in London sugar might result in long liquidation, causing further price drops. According to the latest Commitment of Traders (COT) report, funds increased their net-long positions in London sugar by 954 to reach a total of 42,351, marking the highest level since the data started in 2011.

Brazil Faces Setbacks from Drought and Fires

Brazil’s sugarcane production has also suffered from drought and brush fires, particularly in São Paulo, the country’s leading sugar-producing state. The industry organization Orplana noted that up to 80,000 hectares of sugarcane were affected by around 2,000 fire outbreaks. Green Pool Commodity Specialists estimated that these fires may have resulted in a loss of up to 5 MMT of sugarcane.

Earlier this year, Brazil’s government crop forecasting agency, Conab, lowered its 2024/25 sugar production estimate to 42 MMT from 42.7 MMT due to lower yields attributed to the weather. Similarly, Rabobank revised its forecast down from 40.3 MMT to 39.3 MMT, while Datagro adjusted its estimate on Monday from 39.3 MMT to 38.7 MMT.

Optimistic Monsoon Rains Could Impact Global Prices

In India, optimism over above-average monsoon rains could mean a bumper sugar crop, which may add to the bearish outlook for sugar prices. The Indian Meteorological Department noted that India received 934.8 mm of rain during the current monsoon season, exceeding the long-term average by 7.6%.

Policy Changes in India May Affect Export Dynamics

Support for sugar prices appeared when India’s Food Ministry lifted restrictions on sugar mills producing ethanol for the 2024/25 year, which might extend export curbs. India had previously restricted sugar exports to support domestic supplies, allowing only 6.1 MMT during the 2022/23 season after a peak of 11.1 MMT in the earlier year. The Indian Sugar and Bio-energy Manufacturers Association is advocating for the government to permit 2 MMT of sugar exports for next season.

Reportedly, India’s 2023/24 sugar production is expected to decline by -1.6% to 31.4 MMT, and projections suggest that the 2024/25 output will drop by -2% to 33.3 MMT.

Thailand’s Sugar Production Projects Growth

In contrast, Thailand anticipates an increase in sugar production, with projections showing an 18% rise for the 2024/25 season to 10.35 MMT, following a production of 8.77 MMT in 2023/24. As the world’s third-largest sugar producer, Thailand’s output will play a significant role in the global sugar market.

Global Sugar Deficits Expected Amid Changing Production Levels

On a global scale, the International Sugar Organization (ISO) has forecasted a deficit of -3.58 MMT for 2024/25, surpassing the previously estimated -200,000 MT deficit for 2023/24. ISO also anticipates a drop in global sugar production by -1.1% to 179.3 MMT for the 2024/25 year.

In its bi-annual report, the USDA projected an increase in global sugar production of +1.4% to a record 186.024 MMT, along with an expected rise in consumption by +0.8% to 178.788 MMT. However, global ending stocks are expected to decline by -4.7% to a 13-year low of 38.339 MMT.

More Sugar News from Barchart

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 for informational purposes only. For more details, please view the Barchart Disclosure Policy here.

The views and opinions expressed herein are solely those of the author and do not necessarily reflect those of Nasdaq, Inc.