Sugar Market Faces Mixed Results Amid Economic Uncertainty

On Monday, May NY world sugar #11 (SBK25) closed down -0.13 (-0.72%), while May London ICE white sugar #5 (SWK25) managed a gain of +4.40 (+0.84%).

Market Dynamics and Economic Pressures

Sugar prices experienced mixed settlements, with NY sugar dropping to a 2-3/4 month low. This decline reflects concerns that demand for sugar may decrease as ongoing global trade tensions hinder world economic growth. Tariffs imposed by both the US and China exacerbate this situation, as China’s recent increase in tariffs on all US goods to 125% from 84% affects consumer prices.

London Sugar Gains Amid Contract Expiration

Conversely, London sugar prices rebounded from initial losses, posting moderate gains driven by fund short covering prior to the expiration of the May London ICE white sugar #5 contract scheduled for Tuesday.

Influence of Crude Oil Prices

Additionally, the previous week’s drop in WTI crude oil (CLK25) to a four-year low has negatively impacted sugar prices. Lower crude oil prices often lead to diminished ethanol prices, prompting sugar mills to potentially divert more cane towards sugar production instead of ethanol, which could increase sugar supplies in the market.

Global Sugar Production Forecasts

Despite bearish trends, signs of reduced global sugar production lend support to prices. Unica reported a 5.3% year-over-year decline in Brazil’s Center-South sugar output through March, totaling 40.169 MMT for the 2024/25 season. Similarly, the Indian Sugar and Bio-energy Manufacturers Association revised its 2024/25 sugar production forecast down to 26.4 MMT from an earlier estimate of 27.27 MMT, attributing this adjustment to lower cane yields.

The International Sugar Organization (ISO), on March 6, projected a global sugar deficit for 2024/25 of -4.88 MMT, a significant increase from its previous forecast of -2.51 MMT. This suggests a tighter market compared to the 2023/24 global sugar surplus of 1.31 MMT. Furthermore, the ISO has lowered its production estimate for 2024/25 to 175.5 MMT from 179.1 MMT.

Counterbalancing Production Estimates

On a more bearish note, consultant Datagro forecasted a 6% increase in Brazil’s Center-South sugar production for the 2025/26 season, estimating it would rise to 42.4 MMT. Similarly, Green Pool Commodity Specialists indicated that the global sugar market could shift to a surplus of +2.7 MMT in the 2025/26 crop year after a projected deficit of -3.7 MMT in 2024/25.

India’s Export Policies and Impact

The Indian government has recently allowed its sugar mills to export up to 1 MMT of sugar this season, easing restrictions imposed in 2023 to stabilize domestic supplies. Historically, India had limited sugar exports to 6.1 MMT in the 2022/23 season, following record exports of 11.1 MMT in the preceding season. However, the India Sugar Mills Association (ISMA) anticipates India’s 2024/25 sugar production will decline by 17.5% year-over-year to a five-year low of 26.4 MMT.

Forecasts for Thailand’s Sugar Production

The outlook for increased sugar production in Thailand could further pressure sugar prices. Thailand’s Office of the Cane and Sugar Board has projected a notable growth in its 2024/25 sugar production by 18% y/y, reaching 10.35 MMT. In the previous 2023/24 season, Thailand produced 8.77 MMT, solidifying its position as the world’s third-largest sugar producer and second-largest exporter.

Brazil’s Challenges and Production Estimates

Challenges in Brazil, including drought and excessive heat last year that caused widespread fires in the country’s top sugar-producing state of Sao Paulo, have significantly affected harvests. Green Pool estimated that up to 5 MMT of sugar cane may have been lost due to these fires. Conab, Brazil’s crop forecasting agency, has lowered its 2024/25 sugar production estimate from a previous 46 MMT to 44 MMT, attributing the revision to lower yields from the drought.

USDA Projections on Global Sugar Trends

In its bi-annual report released on November 21, the USDA estimated that global sugar production for 2024/25 would rise by 1.5% year-over-year to a record 186.619 MMT, while human sugar consumption is projected to increase by 1.2% to a record 179.63 MMT. The USDA also forecasted that global ending stocks for 2024/25 would decrease by 6.1% year-over-year 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 solely for informational purposes. For more information, please view the Barchart Disclosure Policy
here.

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