Global Sugar Prices Surge Following Brazilian Weather Changes

Brazil’s Weather Forecast Impacts Sugar Production

March NY world sugar #11 (SBH25) closed at +0.61 (+2.88%) last Friday, while March London ICE white sugar #5 (SWH25) saw an increase of +10.80 (+1.96%). Sugar prices reached a one-week high, buoyed by new weather forecasts predicting below-normal rain for Brazil’s Center-South, the country’s primary sugar-growing area.

Significant Declines in Brazil’s Sugar Output

Recent reports show that sugar production in Brazil’s Center-South has taken a significant hit. According to Unica, output declined by -59.2% year-on-year for the first half of November, dropping to 898 MT. Cumulative production for the 2024/25 season, measured through mid-November, is down -3.0% year-on-year, totaling 38.274 MMT.

Fires and Weather Challenges in Key Regions

This year, drought and extreme heat have led to widespread fires in Brazil, particularly affecting São Paulo, the nation’s leading sugar-producing state. The sugar cane group, Orplana, noted that approximately 2,000 fire incidents impacted around 80,000 hectares of sugarcane. Green Pool Commodity Specialists report that these fires may have resulted in a loss of up to 5 MMT of sugar cane. Furthermore, Conab, Brazil’s governmental crop forecasting agency, reduced its 2024/25 sugar production estimate to 44 MMT, down from a prior forecast of 46 MMT, attributing this adjustment to lower yields caused by drought conditions.

Changing Perspectives on Global Sugar Supply

Earlier this week, NY sugar prices hit a 2.5-month low, while London sugar reached a 3-week low, leading many analysts to expect a more favorable supply situation. The International Sugar Organization (ISO) revised its predictions on November 21, lowering the global sugar deficit for 2024/25 to -2.51 MMT from an earlier forecast of -3.58 MMT. Additionally, the ISO raised its global sugar surplus forecast for the 2023/24 season to 1.31 MMT, up from +200,000 MT in August.

Brazil’s Currency Decline Affects Sugar Exports

The recent fall of the Brazilian real (^USDBRL) to a record low against the dollar poses further challenges for sugar prices, as a weaker currency typically encourages Brazilian producers to increase exports.

Thailand’s Growing Sugar Production Forecast

On a global scale, benefits for sugar prices might be countered by positive forecasts for sugar production in Thailand. According to Thailand’s Office of the Cane and Sugar Board, 2024/25 sugar production is expected to rise by +18% year-on-year to 10.35 MMT, a significant increase from 8.77 MMT in the previous season. Thailand stands as the world’s third-largest sugar producer and the second-largest exporter.

India’s Export Restrictions and Potential Impact on Global Markets

Adding to the complexity, India’s Food Ministry lifted restrictions on sugar mills producing ethanol for the upcoming 2024/25 year, which may extend the country’s sugar export limits. Since October 2023, India has restricted sugar exports to maintain adequate domestic supplies, permitting only 6.1 MMT during the 2022/23 season, a decrease from the record 11.1 MMT in the prior season. However, the Indian Sugar and Bio-energy Manufacturers Association (ISM) indicated that 2 MMT of sugar could be available for export in the next season, requesting the government’s assistance in lifting current restrictions.

Production and Consumption Projections

The ISM reported a -1.6% year-on-year drop in India’s 2023/24 sugar production, estimating it at 31.4 MMT. For the forthcoming season, ISM projects a -2% decrease to 33.3 MMT, with sugar reserves standing at 8.4 MMT, down from an expected 9.1 MMT in May. Furthermore, the ISO’s August forecast anticipates global sugar production for 2024/25 to reach 179.3 MMT, reflecting a slight -1.1% decline from 181.3 MMT in 2023/24.

USDA’s Rising Global Sugar Estimates

In a recent report released on November 21, the USDA projected that global sugar production for 2024/25 will climb by +1.5% year-on-year to a record 186.619 MMT. It also anticipates that global sugar consumption will increase by +1.2% to a record 179.63 MMT, with ending stocks predicted to decline by -6.1% to 45.427 MMT.

On the date of publication, Rich Asplund did not hold positions in any of the securities mentioned in this article. All information is provided for informational purposes. For further details, view the Barchart Disclosure Policy here.

The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.