Mixed Signals in Sugar Markets as Global Production Outlook Shifts
March NY Sugar Sees Small Gains Amid Production Concerns
March NY world sugar #11 (SBH25) closed up +0.11 (+0.57%) on Friday, while March London ICE white sugar #5 (SWH25) dropped -9.90 (-1.91%). Sugar prices showed a mixed settlement as NY sugar prices rose, driven by short covering. This trend was fueled by reports from Unica indicating that cumulative sugar output in Brazil’s Center-South region for the 2024/25 season is down -5.1% year-over-year (y/y) to 39.711 million metric tons (MMT). Only 129 sugar mills were in operation in Brazil during the first half of December, a significant decrease from 185 mills last year.
London Sugar Prices React to NY Market Losses
In London, sugar prices fell on Friday as the market adjusted after being closed for the Christmas and Boxing Day holidays. The decline came on the heels of a significant drop in NY sugar, which recently hit a 3-1/4 month low. This drop has been attributed to comments from India’s Food Secretary, who indicated that sugar exports may be possible if there is a surplus after meeting domestic ethanol blending requirements.
Concerns Over Global Sugar Supply and Brazil’s Currency Weakness
External factors have pressured sugar prices. The Brazilian real (^USDBRL) weakened by -0.31% on Friday, remaining just above a record low against the dollar. Furthermore, the International Sugar Organization (ISO) revised its global sugar deficit forecast for 2024/25 to -2.51 MMT, an improvement from its previous estimate of -3.58 MMT in August. The ISO also increased its 2023/24 global sugar surplus estimate to 1.31 MMT, up from 200,000 MT earlier this year.
Production Increases Expected from Thailand
Thailand’s sugar production outlook adds to bearish sentiment in the market. The Office of the Cane and Sugar Board expects a production increase of +18% y/y for 2024/25, amounting to 10.35 MMT. This follows a production of 8.77 MMT in the 2023/24 season.
India’s Reduced Sugar Output Provides Support
India’s sugar sector presents a contrasting situation. The National Federation of India Cooperative Sugar Factories Ltd reported an -18% y/y decrease in sugar production from October 1 to December 15, totaling 6.1 MMT. Earlier this year, drought and heat led to significant crop damage in Brazil, with estimates from Green Pool Commodity Specialists suggesting that as much as 5 MMT of sugar cane might have been lost due to fires affecting about 80,000 hectares in São Paulo.
Government Actions and Export Restrictions
India’s Food Ministry has taken recent steps that may continue to constrain sugar exports. In August, it lifted restrictions on sugar mills producing ethanol for the 2024/25 season, likely prolonging the hold on sugar exports. Last year, to bolster sugar reserves, India restricted exports to 6.1 MMT, down from a record 11.1 MMT. However, the Indian Sugar and Bio-energy Manufacturers Association (ISM) has argued for clearer government guidance on potential export volumes for the next season.
Production Forecasts and Market Predictions
Additionally, the ISM has predicted a -2% y/y decline in India’s 2024/25 sugar production to 33.3 MMT, with expected reserves at 8.4 MMT by September 30. In contrast, the USDA’s bi-annual report projects a record global sugar production of 186.619 MMT, up +1.5% y/y. It also forecasts +1.2% y/y growth in global sugar consumption, reaching 179.63 MMT, while ending stocks are expected to fall -6.1% y/y to 45.427 MMT.
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 is 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.
