Sugar Prices Surge Amid Production Concerns and Weather Challenges
March NY world sugar #11 (SBH25) today is up +0.67 (+3.08%), and December London ICE white sugar #5 (SWZ24) is up +12.30 (+2.19%).
Supply Woes: Brazil’s Sugar Shortage Forecast
Sugar prices are climbing as Wilmar International, a leading global sugar trader, warns of a “huge risk of a shortage of Brazilian sugar” in the first half of 2025. Low inventory levels and delayed harvesting due to recent droughts threaten Brazil’s sugar production. Rabobank also revised its 2024/25 Brazil sugar output prediction from 40.3 million metric tons (MMT) to 39.3 MMT, citing extreme dryness.
Weather Changes and Price Fluctuations
Earlier this week, sugar prices saw a downturn due to forecasts of substantial rains in Brazil’s Center-South region, offering hope to ease drought issues. Meteorologist Climatempo reported heavier rainfall expected beginning Friday, which would moderate temperatures and enhance soil moisture. This area is Brazil’s primary sugar-producing region.
Production Estimates Drop Amid Drought Conditions
Despite some price drops, the outlook for sugar remains cautious after Datagro lowered its 2024/25 production estimate for the Center-South to 38.7 MMT from 39.3 MMT, citing drought and limited mill capacity. Furthermore, data from Unica revealed a 16.2% year-over-year decrease in sugar output for the second half of September, although cumulative production through that month still shows a slight increase of 1.5% to 33.154 MMT.
Fire Damage Compounds Production Challenges
Drought and extreme heat have led to wildfires damaging crops in Sao Paulo, Brazil’s dominant sugar-producing state. Orplana reported around 2,000 fire incidents which affected nearly 80,000 hectares of sugarcane. According to Green Pool Commodity Specialists, up to 5 MMT of sugar cane may have been lost. The Brazilian government’s forecasting agency, Conab, has already reduced its 2024/25 production estimate due to these adverse conditions.
India’s Monsoon and Its Impact on Global Prices
On another front, India is expected to see a strong sugar crop due to above-average monsoon rains, reported at 934.8 mm as of September 30, marking a 7.6% increase from the long-term average. This trend is seen as bearish for global sugar prices.
India’s Export Curbs Persist
In a move supporting sugar prices, India’s Food Ministry removed restrictions on ethanol production from sugar mills for the 2024/25 year, potentially extending export limits. India had previously restricted sugar exports since October 2023 to sustain domestic supplies, allowing exports of only 6.1 MMT of sugar during the 2022/23 season.
Future Projections for India’s Sugar Industry
The Indian Sugar and Bio-energy Manufacturers Association projected a minor decline in India’s 2023/24 sugar production, falling 1.6% year-on-year to 31.4 MMT. For 2024/25, they expect a further decline of 2% to 33.3 MMT, with current reserves at a lower estimate of 8.4 MMT.
Thailand’s Projections add to Global Supply Context
Meanwhile, Thailand’s Office of the Cane and Sugar Board anticipates its sugar production will rise by 18% to 10.35 MMT for 2024/25, following a production of 8.77 MMT in the previous season. As the world’s third-largest sugar producer, Thailand’s output could affect global sugar market dynamics.
Global Sugar Production Forecasts and Future Imbalances
The International Sugar Organization forecasted a global sugar deficit of 3.58 MMT for 2024/25, significantly larger than the earlier estimated deficit of 200,000 MT for the current season. They also predict that global sugar production will decline by 1.1% year-on-year to 179.3 MMT.
A USDA Perspective on Global Supply and Demand
The USDA’s report released on May 23 forecasts a 1.4% increase in global sugar production, reaching a record 186.024 MMT. Human sugar consumption is also expected to rise by 0.8% to 178.788 MMT, although ending stocks are projected to decrease 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 is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
