Sugar Prices Bounce Back Amid Global Market Changes
On Tuesday, March NY world sugar #11 (SBH25) saw a rise of +0.13 (+0.68%), while March London ICE white sugar #5 (SWH25) climbed +376 (+0.72%).
Market Recovery After Early Declines
Sugar prices rebounded on Tuesday after initially losing ground. The increase in WTI crude oil (CLG25) to an 8-week high triggered short covering in sugar futures. Higher crude oil prices boost ethanol values, encouraging global sugar mills to shift more cane toward ethanol production rather than sugar, which could limit sugar supply.
Recent Trends Show Lower Prices
In the last three months, sugar prices have generally decreased due to a better global supply outlook. Chicago sugar hit a 3-1/2 month low, while London sugar reached a 2-3/4 year low on Monday. The International Sugar Organization (ISO), on November 21, lowered its 2024/25 global sugar deficit forecast to -2.51 MMT from an earlier estimate of -3.58 MMT in August. It also raised the 2023/24 surplus estimate to 1.31 MMT from +200,000 MT previously.
Thailand’s Production Projected to Rise
The prospect of increased sugar production in Thailand is contributing to the downward pressure on sugar prices. On October 29, Thailand’s Office of the Cane and Sugar Board projected a +18% year-over-year increase in sugar production for 2024/25, expecting it to reach 10.35 MMT, compared to 8.77 MMT during the 2023/24 season. Thailand ranks as the world’s third-largest producer and second-largest exporter of sugar.
India’s Potential Sugar Exports
India’s Food Secretary Chopra indicated on December 19 that the country might permit sugar exports if a surplus arises after meeting domestic ethanol blending targets. Current estimates suggest a sugar surplus of approximately 1 MMT for this season.
Brazil’s Economic Factors Hinder Sugar Sales
Meanwhile, sugar prices are facing challenges due to a weak Brazilian real (^USDBRL), which encourages Brazilian producers to export more sugar. The real is hovering just above its lowest value against the dollar recorded on December 18.
Brazilian Crop Damage Due to Drought
This year, drought and extreme heat caused significant damage to sugar crops in Brazil’s leading sugar-producing region, Sao Paulo. Reports indicate that around 2,000 fires affected up to 80,000 hectares. Green Pool Commodity Specialists estimate the loss of sugar cane may reach 5 MMT. Additionally, Brazil’s Conab has reduced its 2024/25 sugar production estimate to 44 MMT from 46 MMT due to poor sugarcane yields. Unica reported a -5.1% year-over-year decrease in cumulative sugar output for the Center-South region through mid-December, with only 129 mills operational compared to 185 for the same period last year.
India’s Ethanol Production Policy Impact
Support for sugar prices arises from India’s Food Ministry lifting restrictions on sugar mills producing ethanol for the 2024/25 cycle beginning in November. Previous measures in December directed sugar mills to halt ethanol production to bolster sugar reserves. Since October 2023, India has restricted sugar exports to ensure domestic supply, exporting only 6.1 MMT in the 2022/23 season compared to a record 11.1 MMT in the prior season. However, the Indian Sugar and Bio-energy Manufacturers Association (ISM) has predicted that India’s sugar production for the 2024/25 season could decrease by -2% to 33.3 MMT.
Global Sugar Production Estimates
On August 30, the ISO forecasted global sugar production for 2024/25 to be 179.3 MMT, a -1.1% decline from 181.3 MMT in 2023/24. In November, the USDA projected a +1.5% increase in global sugar output for 2024/25, predicting a record 186.619 MMT. They also expect a +1.2% rise in global sugar consumption to 179.63 MMT, with global ending stocks declining -6.1% to 45.427 MMT.
At the time of publication, Rich Asplund did not hold any positions in the securities mentioned in this article. All information and data herein are for informational purposes only. For more details, please refer to the Barchart Disclosure Policy here.
The views and opinions expressed in this article are those of the author and do not necessarily reflect the considerations of Nasdaq, Inc.
