Sugar Prices Drop Amid Global Supply Changes

March NY world sugar #11 (SBH25) today is down -0.53 (-2.44%), and March London ICE white sugar #5 (SWH25) is down -7.70 (-1.38%).

Market Overview: Declines Driven by Brazilian Currency and Supply Landscape

Sugar prices are trending lower today, with NY sugar reaching a two-week low. A selloff in the Brazilian real (^USDBRL) to a record low against the dollar has prompted Brazil’s sugar producers to ramp up export selling, which has also led to long liquidation in sugar futures.

Forecast Adjustments Shape Price Movements

The International Sugar Organization (ISO) is predicting a decrease in the 2024/25 global sugar deficit, revising it to -2.51 MMT from an earlier forecast of -3.58 MMT. Additionally, the ISO has adjusted its 2023/24 global sugar surplus estimate to 1.31 MMT, a significant increase from the August projection of +200,000 MT.

Production Reports from Brazil Highlight Challenges

An important factor is the decline in sugar production in Brazil’s Center-South region. Recently, Unica announced a dramatic year-over-year decrease of -59.2%, bringing output down to 898 MT for the first half of November. Cumulative outputs for the 2024/25 season are also down -3.0% y/y to 38.274 MMT.

Last Tuesday, sugar prices surged to two-week highs following Wilmar International’s predictions that the number of closed sugar mills in Brazil would more than triple this month. Typically, these mills halt processing during the rainy season in December and January, but recent heavy rains have triggered earlier closures than expected.

Environmental Issues Complicate Brazil’s Sugar Production

This year, drought and extreme heat caused fires that damaged significant sugar crops in São Paulo, Brazil’s main sugar-producing state. The sugar cane industry group Orplana reported approximately 2,000 fire outbreaks affecting up to 80,000 hectares of sugarcane. It is estimated that these fires may have resulted in the loss of up to 5 MMT of sugar cane. Consequently, Brazil’s government crop forecasting agency, Conab, lowered its overall 2024/25 sugar production estimate to 44 MMT from 46 MMT, attributing this to reduced sugarcane yields.

Shift in Sugar Production Outlook in Thailand

Meanwhile, prospects of increased sugar production in Thailand could add downward pressure on prices. The country’s Office of the Cane and Sugar Board projected a notable rise in production for 2024/25 to 10.35 MMT, an 18% increase year over year. With Thailand being the world’s third-largest sugar producer and the second-largest exporter, this could have significant implications for global sugar markets.

India’s Export Policies and Domestic Production

In India, the Food Ministry lifted restrictions on sugar mills producing ethanol for the 2024/25 year. This move may extend current sugar export limits, which were implemented in response to domestic supply needs. India only allowed mills to export 6.1 MMT of sugar in the 2022/23 season, a drastic reduction from a previous high of 11.1 MMT.

The Indian Sugar and Bio-energy Manufacturers Association (ISM) noted a slight decline in India’s 2023/24 sugar production, down 1.6% y/y to 31.4 MMT. Furthermore, projections for 2024/25 estimate a -2% drop to 33.3 MMT, along with a reduction in sugar reserves.

Global Sugar Production and Consumption Predictions

On a global scale, the ISO forecasts production for 2024/25 to reach 179.3 MMT, reflecting a slight decline of -1.1% from the previous year. Conversely, the USDA’s recent bi-annual report predicts a rise in global sugar production by +1.5% to a record 186.619 MMT for 2024/25, with human consumption expected to increase by +1.2% to 179.63 MMT. The USDA also anticipates a decline in global sugar ending stocks by -6.1% 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 are 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.