Global Sugar Prices Slide Amid Mixed Production Predictions

Market Overview: Sugar Prices Decline

March NY world sugar #11 (SBH25) has dropped by -0.12 (-0.66%), while March London ICE white sugar #5 (SWH25) is down -0.20 (-0.04%).

Today’s sugar prices are lower due to an improved outlook for global supply. For the last three months, sugar prices have been on a downward trend. Recently, NY sugar reached its lowest point in 3-1/2 months, while London sugar hit its lowest level in 2-3/4 years. On November 21, the International Sugar Organization (ISO) reduced its 2024/25 global sugar deficit forecast to -2.51 MMT, down from an earlier August estimate of -3.58 MMT. Additionally, the ISO increased its 2023/24 global sugar surplus estimate from +200,000 MT to 1.31 MMT.

Falters from Brazil: Currency Weakness

The Brazilian real (^USDBRL) remains weak, prompting sugar producers in Brazil to increase exports. The real is currently hovering just above its all-time low against the dollar, recorded on December 18.

Crude Oil Prices Affect Sugar Markets

The rally in WTI crude oil (CLG25), which has reached a 2-1/2 month high, is helping limit further sugar price losses. Strong crude oil prices can boost ethanol prices, leading sugar mills to potentially divert more sugarcane towards ethanol production rather than sugar, which could reduce sugar supplies.

Production Changes in India Signal Volatility

On Thursday, NY sugar climbed to a two-week high, with London sugar also increasing to a one-week high due to indications of reduced sugar production in India, the world’s second-largest sugar producer. The Indian Sugar and Bio-energy Manufacturers Association (ISM) reported a -15.5% year-over-year decrease in India’s sugar production for the October 1 to December 31 period, contributing to potential government export restrictions that could further limit global sugar supplies.

Thailand’s Rise: Expectation of Higher Production

Conversely, forecasts for increased sugar production in Thailand are considered bearish for sugar prices. The Office of the Cane and Sugar Board projected an +18% year-over-year increase in Thailand’s 2024/25 sugar production to 10.35 MMT, up from 8.77 MMT in the 2023/24 season. Thailand is currently the world’s third-largest sugar producer and the second-largest exporter.

India’s Potential Exports: Conditional on Surplus

On December 19, India’s Food Secretary Chopra mentioned that sugar exports could be allowed if a surplus is confirmed after meeting domestic ethanol blending requirements. The Indian government currently estimates a sugar surplus of approximately 1 MMT for this season.

Weather Impact: Brazil’s Production Challenges

This year, Brazil faced severe drought and heat, resulting in fires that damaged sugar crops in its leading sugar-producing state, Sao Paulo. The sugar cane industry group Orplana reported that around 2,000 fire outbreaks affected up to 80,000 hectares of sugarcane. Green Pool Commodity Specialists warned that as much as 5 MMT of sugarcane may have been lost due to these fires. On November 21, Brazil’s government crop forecasting agency, Conab, revised its 2024/25 sugar production estimate down to 44 MMT from a previous 46 MMT, noting lower yields due to adverse weather conditions. Additionally, Unica reported last Friday that cumulative sugar output in Brazil for 2024/25 through mid-December is down -5.1% year-over-year.

India’s Export Restrictions Persist

In a move to support sugar prices, India lifted restrictions on sugar mills producing ethanol for the 2024/25 year starting in November. Last December, India mandated sugar mills to stop using sugarcane for ethanol production during the 2023/24 supply year to bolster its sugar reserves. For context, India limited sugar exports to 6.1 MMT in the 2022/23 season following a record 11.1 MMT in the previous season. As of October 3, the ISM indicated that India might have 2 MMT available for export in the next season and urged the government to reconsider existing export restrictions.

Global Production Projections: A Mixed Bag

On September 26, the ISM projected India’s sugar production for the 2024/25 season to decline by -2% to 33.3 MMT, while also forecasting 8.4 MMT of sugar reserves on September 30, decreasing from a previous estimate of 9.1 MMT. Separately, the National Federation of India Cooperative Sugar Factories reported on Monday that sugar production from October 1 to December 15 fell by -18% year-over-year to 6.1 MMT.

Global Estimates: Sugar Consumption and Production Trends

The ISO, on August 30, forecasted global sugar production for 2024/25 to be 179.3 MMT, reflecting a -1.1% decrease from 181.3 MMT in 2023/24. Conversely, the USDA’s bi-annual report released on November 21 projected a +1.5% increase in global sugar production for 2024/25 to a record 186.619 MMT, with human sugar consumption also rising by +1.2% to a record 179.63 MMT. Furthermore, the USDA expects global sugar ending stocks to decline by -6.1% year-over-year to 45.427 MMT.

On the date of publication, Rich Asplund did not hold any positions in the securities mentioned in this article. All information and data herein are intended for informational purposes only. Further details can be found in the Barchart Disclosure Policy here.

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