Sugar Prices Mixed Amid Crude Oil Gains and Production Forecasts

July NY world sugar #11 (SBN25) rose by +0.05 (+0.28%), while August London ICE white sugar #5 (SWQ25) decreased by -1.80 (-0.36%).

Sugar Market Overview

The sugar market today experienced a decline from two-week highs, with mixed results overall. A rise in crude oil prices, particularly WTI crude oil (CLM25), which increased over 1% reaching a two-week peak, often supports sugar prices. Higher crude prices boost ethanol production, potentially pushing sugar mills to focus more on ethanol over sugar production, which may reduce sugar supplies. Despite this bullish factor, sugar prices fell as London sugar dropped into negative territory after the dollar index (DXY00) surged to a one-month high.

Production Insights

Recent data reveals challenges for sugar prices. On May 2, July NY sugar hit a nearest-futures low unseen in 3¾ years. Conversely, London sugar saw a similar trend, falling to a 3¾ month low last Wednesday, primarily due to predictions of increased sugar production in Brazil. Notably, Unica reported a +1.3% year-over-year increase in Brazil’s Center-South sugar output for mid-April, totaling 731,000 metric tons (MT). This was the inaugural report for the 2025/26 season.

Further projections showed strong growth. Conab forecasted a +4.0% year-over-year rise in Brazil’s sugar production for 2025/26, predicting a total of 45.875 million MT. Such expectations signify an increase in global sugar supply, which may negatively impact prices.

Global Production Predictions

A significant prediction from the USDA’s Foreign Agricultural Service (FAS) indicated India’s sugar production for 2025/26 could grow by +26% year-over-year to reach 35 million MT, fueled by favorable rainfall and expanded sugar acreage. In addition, Brazil’s sugar production for the same period is projected to rise +2.3% to 44.7 million MT.

The forecast of above-normal rainfall in India, anticipated to be around 105% of the long-term average this monsoon season, further contributes to expectations of a bumper sugar crop. India’s monsoon season typically runs from June through September.

Market Pressures

India’s plan to allow sugar mills to export 1 million MT this season, as stated on January 20, could impact prices. The nation previously imposed a restriction to maintain local supply levels. In the 2022/23 season, India exported only 6.1 million MT, significantly down from the record 11.1 million MT in the season prior. However, the ISMA predicted that India’s sugar production for 2024/25 may drop by -17.5% year-over-year to a five-year low of 26.4 million MT.

Adding to bearish sentiments, Thailand’s sugar production forecasts indicate an increase as well, with a 14% year-over-year rise projected for 2024/25, totaling 10 million MT. Thailand ranks as the world’s third-largest sugar producer and second-largest exporter.

Contradictory Indicators

Conversely, signs of lower production in certain areas may lend support to sugar prices. For instance, Unica reported that Brazil’s sugar output through March 2024/25 declined by 5.3% year-over-year to 40.169 million MT. Additionally, the Indian Sugar and Bio-energy Manufacturers Association lowered its 2024/25 production estimate to 26.4 million MT due to reduced cane yields.

The International Sugar Organization (ISO) has adjusted its global sugar deficit forecast for 2024/25, now predicting a deficit of -4.88 million MT, a shift from their November forecast of -2.51 million MT. This comes as they reduced their global production estimate to 175.5 million MT.

Risks from Natural Disasters

Last year’s drought and accompanying heat caused crop damage in Brazil, particularly in the key sugar-producing state of São Paulo, with Green Pool Commodity Specialists estimating that approximately 5 million MT of sugar cane were lost to fires. As a result, Conab projects a -3.4% year-over-year decrease in Brazil’s sugar production for 2024/25, estimating a total of 44.118 million MT.

Final Projections

The USDA’s bi-annual report released on November 21 projected global sugar production to increase by +1.5% year-over-year to a record 186.619 million MT for 2024/25, alongside an expected rise in global sugar consumption to 179.63 million MT, a +1.2% increase. Nonetheless, the USDA also foresees global ending stocks decreasing by -6.1% to 45.427 million MT.

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 solely for informational purposes. For more information, please view the Barchart Disclosure Policy

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