Sugar Prices Rise Amid Mixed Global Supply Outlook

May NY world sugar #11 (SBK25) closed on Wednesday up +0.24 (+1.24%), while May London ICE white sugar #5 (SWK25) increased by +7.00 (+1.28%).

Market Dynamics Drive Sugar Price Increases

On Wednesday, sugar prices reached one-week highs and ended higher due to a weakening dollar. The dollar index (DXY00) fell to a 1.5-week low, prompting short covering in sugar futures.

Recent Trends Affecting Sugar Prices

Prior to the increase, sugar prices dipped to three-week lows on Monday. This decline followed a report from Meteorologist Climatempo indicating above-average rainfall in Brazil, which benefits the sugar crop.

Current signs point towards lower global sugar production, supporting higher prices. The Indian Sugar and Bio-energy Manufacturers Association revised its 2024/25 India sugar production forecast to 26.4 million metric tons (MMT) from a January estimate of 27.27 MMT, citing lower cane yields. Additionally, Unica reported that Brazil’s Center-South sugar output fell by 5.3% year-on-year to 39.983 MMT as of mid-March.

Furthermore, sugar trader Czarnikow reduced its Brazil 2025/26 sugar production estimate to 42 MMT from 43.6 MMT previously. In contrast, the International Sugar Organization (ISO) raised its 2024/25 global sugar deficit forecast to -4.88 MMT, up from a November prediction of -2.51 MMT, indicating a shift from the 2023/24 global sugar surplus of 1.31 MMT. The ISO also lowered its 2024/25 global sugar production forecast to 175.5 MMT from an earlier estimate of 179.1 MMT.

Contrasting Forecasts from Industry Analysts

On the bearish side, consultant Datagro projects that Brazil’s Center-South sugar production will increase by 6% year-on-year to 42.4 MMT for 2025/26. Green Pool Commodity Specialists also suggest a surplus may develop, predicting a shift from a deficit of -3.7 MMT in 2024/25 to a surplus of 2.7 MMT in 2025/26.

Export Policies and Market Impact

India’s sugar export policies add another variable to the market. On January 20, the Indian government announced it would permit its sugar mills to export 1 MMT of sugar this season, easing restrictions that have been in place since October 2023 to ensure domestic supplies are stable. Last season, India allowed export of 6.1 MMT of sugar compared to a record 11.1 MMT in the prior season. However, the India Sugar Mills Association (ISMA) expects sugar production to fall by 17.5% year-on-year to a five-year low of 26.4 MMT for 2024/25.

Outlook for Thailand’s Sugar Production

The forecast for Thailand shows potential for increased sugar production. On October 29, Thailand’s Office of the Cane and Sugar Board projected an 18% year-on-year increase in sugar production to 10.35 MMT for the 2024/25 season, following production of 8.77 MMT in 2023/24. Thailand ranks as the world’s third-largest sugar producer and second-largest exporter.

Climate Challenges in Sugar Production

Challenges in sugar production persist, particularly in Brazil, where drought and excessive heat last year led to fires that damaged crops in the key sugar-producing state of São Paulo. Green Pool Commodity Specialists indicated that around 5 MMT of sugar cane may have been lost due to these fires. Conab, Brazil’s government crop forecasting agency, has since adjusted its 2024/25 sugar production estimation down to 44 MMT from 46 MMT, attributing the decrease to lower cane yields resulting from adverse weather conditions.

U.S. Department of Agriculture Projections

The USDA’s bi-annual report, released on November 21, forecasts a 1.5% year-on-year increase in global sugar production for 2024/25, reaching a record 186.619 MMT. It also anticipates a 1.2% increase in global human sugar consumption to 179.63 MMT and a decline in global ending stocks by 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 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.