Sugar Prices Rise Amid Rising Crude Oil and Global Production Forecasts

July NY world sugar #11 (SBN25) Thursday closed up +0.37 (+2.16%), while August London ICE white sugar #5 (SWQ25) increase by +9.50 (+1.96%).

Market Movement Driven by Crude Oil Prices

Sugar prices settled higher this Thursday, influenced by a 3% increase in WTI crude oil (CLM25). This rise led to short covering in sugar futures. When crude prices rise, they benefit ethanol production, leading sugar mills to possibly redirect more cane towards ethanol instead of sugar, which could limit sugar supplies.

Recent Price Trends and Production Reports

Last Friday, July NY sugar established a 3-3/4 year nearest-futures low. On Wednesday, London sugar fell to a 3-1/2 month low due to expectations of increased sugar production in Brazil. According to Unica’s report last Wednesday, Brazil’s Center-South sugar production jumped +1.3% year-on-year to 731,000 MT for the first half of April. This report marked the first for the 2025/26 season. The following day, Conab forecasted a +4.0% growth in Brazil’s 2025/26 sugar production, projecting it to reach 45.875 MMT.

Global Sugar Output Forecasts and Their Impact

Looking at global production, factors indicating a rise in sugar output create a bearish outlook for prices. On Tuesday, the USDA’s Foreign Agricultural Service (FAS) predicted that India’s 2025/26 sugar production would rise by +26% year-on-year to 35 MMT, spurred by favorable monsoon rains and an increase in sugar acreage. Earlier, on April 23, the USDA forecasted Brazil’s 2025/26 sugar production to rise to 44.7 MMT from 43.7 MMT the previous season.

Weather Conditions Affect Production Outlook

Favorable weather conditions predicted in India are expected to boost sugar production. India’s Ministry of Earth Sciences projected that monsoon rainfall would be 105% of the long-term average, with the seasonal rains expected from June through September.

Concerns Over Export Regulations in India

On a less favorable note, as the Indian government announced plans on January 20 to permit the export of 1 MMT of sugar this season, it eased previous restrictions on sugar exports. India had limited sugar exports since October 2023 to ensure supply adequacy. The country managed to export only 6.1 MMT during the 2022/23 season, a sharp decline from exports of 11.1 MMT the season prior. However, the ISMA estimates that India’s sugar production will decrease by -17.5% year-on-year to a five-year low of 26.4 MMT for 2024/25.

Production Increases in Thai Sugar Impact Prices

In Thailand, a recent report indicated that sugar production for the 2024/25 season is projected to rise by +14% year-on-year to 10.00 MMT. As the third-largest sugar producer and the second-largest exporter globally, this trend further contributes to bearish pressure on sugar prices.

Supportive Signals from Global Production Reductions

Conversely, reports of declining sugar production globally can lend support to sugar prices. Unica announced that Brazil’s cumulative sugar output for 2024/25 through March dropped by 5.3% year-on-year to 40.169 MMT. Furthermore, the Indian Sugar and Bio-energy Manufacturers Association revised its production forecast for India to 26.4 MMT for the 2024/25 season, down from an earlier estimate of 27.27 MMT due to lower cane yields.

International Forecasts and Historical Context

Meanwhile, the International Sugar Organization (ISO) raised its global sugar deficit forecast for 2024/25 to -4.88 MMT, up from a previous estimate of -2.51 MMT. This adjustment aligns with the tightening market compared to the surplus of 1.31 MMT in 2023/24. Notably, the ISO also revised its 2024/25 global sugar production estimate down to 175.5 MMT from 179.1 MMT.

Impact of Environmental Factors on Brazilian Production

Environmental challenges have also played a role; drought and heat last year affected sugar crops in Brazil’s top-producing state, São Paulo. Green Pool Commodity Specialists noted that up to 5 MMT of sugar cane may have been lost. Last Thursday, Conab forecasted a -3.4% drop in Brazil’s 2024/25 sugar production, projecting it at 44.118 MMT due to reduced yields from these weather conditions.

Long-Term Projections from USDA

The USDA’s bi-annual report, released on November 21, projected global sugar production in 2024/25 to rise +1.5% year-on-year to a record 186.619 MMT. The same report estimated global human sugar consumption to increase +1.2% year-on-year to a record 179.63 MMT. Furthermore, the USDA forecasted that global ending stocks would decline -6.1% year-on-year 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 is solely for informational purposes. For additional information, please view the Barchart Disclosure Policy.

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