Sugar Prices Dip Amid Global Production Changes
March NY world sugar #11 (SBH25) closed down -0.37 (-1.68%), while March London ICE white sugar #5 (SWH25) declined -9.40 (-1.65%) on Wednesday.
Dollar Strength Pressures Sugar Futures
Sugar prices dropped moderately on Wednesday, largely due to the strength of the dollar (DXY00), which sparked long liquidation in sugar futures.
Brazil’s Production Decline Raises Prices
On Tuesday, sugar prices soared to 1-1/2 week highs following Wilmar International’s projections that the number of closed sugar mills in Brazil, currently at 38, will triple this month. This significant reduction in operational mills is expected to sharply cut Brazil’s sugar output. Typically, Brazilian mills pause cane processing during the rainy months of December and January, resuming in March, depending on weather conditions. However, heavy rains this month have caused earlier-than-expected shutdowns.
Thailand’s Sugar Gain Signals Price Concerns
Contrarily, projected increases in sugar production from Thailand may weigh on sugar prices. On October 29, Thailand’s Office of the Cane and Sugar Board estimated that 2024/25 sugar production would surge by +18% year-over-year, reaching 10.35 MMT. In comparison, Thailand produced 8.77 MMT of sugar during the previous season, maintaining its position as the world’s third-largest sugar producer and second-largest exporter.
India’s Monsoon Brings Mixed Prospects
Hope for a bumper sugar crop is offset by a generally bearish outlook. The Indian Meteorological Department reported that as of September 30, India received 934.8 mm of rain during this year’s monsoon, the most in four years, surpassing the long-term average of 868.6 mm. The monsoon season lasts from June through September, and abundant rainfall typically boosts sugar production.
Brazil’s Production Struggles
A report from Unica last Tuesday revealed a -24.3% year-over-year drop in sugar output in Brazil’s Center-South region during the second half of October, totaling 1.785 MMT. In contrast, the cumulative sugar output through October rose by +0.3% year-over-year to 37 MMT.
Fires and Droughts Affect Brazil’s Sugar Industry
Brazil’s top sugar-growing state, Sao Paulo, faced recent drought and excessive heat, leading to fires that damaged numerous sugarcane crops. The industry group Orplana reported that about 2,000 fire incidents affected nearly 80,000 hectares of planted sugarcane. Green Pool Commodity Specialists estimate that up to 5 MMT of sugar cane may have been lost. Consequently, Brazil’s government crop forecaster, Conab, reduced its 2024/25 sugar production estimate for the region from 42.7 MMT to 42 MMT, while Rabobank and Datagro also revised their forecasts downward due to ongoing drought conditions.
India’s Trade Restrictions Impact Prices
On a more supportive note for sugar prices, India’s Food Ministry lifted restrictions on sugar mills for ethanol production for the upcoming 2024/25 year starting in November. This decision may prolong India’s sugar export limitations. Last December, India halted sugarcane use for ethanol production to increase sugar reserves. Since October 2023, export restrictions have been in place, allowing only 6.1 MMT of sugar to be exported during the 2022/23 season, a drop from the record 11.1 MMT the previous season. However, the Indian Sugar and Bio-energy Manufacturers Association (ISM) indicated that India could export 2 MMT next season and has requested the government to reconsider current restrictions.
Future Global Supply and Demand Developments
Looking ahead, the ISM reported a -1.6% year-over-year decline in India’s 2023/24 sugar production, totaling 31.4 MMT. Furthermore, they project a decrease in India’s 2024/25 sugar production by -2% year-over-year to 33.3 MMT. Additionally, India’s sugar reserves as of September 30 are now expected to be at 8.4 MMT, down from the 9.1 MMT projected in May.
Global Sugar Outlook Remains Mixed
In a broader context, the International Sugar Organization (ISO) forecasted a global sugar deficit of -3.58 MMT for 2024/25, significantly larger than the estimated -200,000 MT deficit for 2023/24. ISO anticipates global sugar production will be 179.3 MMT, marking a -1.1% decline year-over-year from 181.3 MMT in the previous season. Conversely, the USDA’s biannual report, released on May 23, predicts a +1.4% rise in global sugar production for 2024/25, reaching a record 186.024 MMT. This growth comes alongside an anticipated increase in global sugar consumption of +0.8% year-over-year to 178.788 MMT. Despite this production increase, the USDA projects a -4.7% reduction in global sugar ending stocks, falling to a 13-year low of 38.339 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.
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