Sugar Prices Rise as Brazilian Real Strengthens
March NY world sugar #11 (SBH25) is up +0.17 (+0.88%) today, while March London ICE white sugar #5 (SWH25) has increased +3.20 (+0.62%).
Bullish Trends from Brazil
Sugar prices are climbing today, mostly due to the strengthening Brazilian real (^USDBRL), which has risen by +0.61%. Just below a 2-3/4 month high against the dollar, the stronger real is encouraging fund short-covering in sugar futures. Over the past three weeks, the real’s strength has contributed to a rise in sugar prices, which reached a 7-week high last Thursday. This boost in value discourages sugar producers from exporting, as it makes their products more competitive domestically.
Production Cuts in India Support Prices
Recent reports indicate a drop in sugar production from India for the 2024/25 season, contributing to support for prices. Centrum estimates a decline of -12.2% year-on-year to 16.5 million metric tons (MMT) between October 1 and January 31.
Projected Surplus May Pressure Prices
On the downside, projections from Green Pool Commodity Specialists suggest that the global sugar market will experience a surplus of +2.7 MMT in the 2025/26 crop year, reversing a deficit of -3.7 MMT for 2024/25. This outlook takes into account several factors, including an expected increase in global sugar supply.
Market Trends and Historical Context
Sugar has faced a four-month downtrend since January, with NY sugar reaching a 5-3/4 month low and London sugar hitting a 3-1/2-year low. The Indian government’s decision in January to allow sugar mills to export 1 MMT this season has eased restrictions that had been in place since October 2023, during which exports were limited to maintain domestic supplies. For context, India exported a record 11.1 MMT in the previous season but only allowed 6.1 MMT in 2022/23.
Revision of Global Sugar Deficit Forecast
The International Sugar Organization (ISO) recently revised its 2024/25 global sugar deficit forecast to -2.51 MMT, an improvement from the earlier estimate of -3.58 MMT. The ISO also increased its 2023/24 global sugar surplus estimate to 1.31 MMT from 200,000 MT in August.
Thailand’s Sugar Production Outlook
In Thailand, a forecast by the Office of the Cane and Sugar Board indicates a potential +18% year-on-year increase in sugar production to 10.35 MMT for the 2024/25 season. This follows production of 8.77 MMT in 2023/24. As the third-largest sugar producer globally and the second-largest exporter, changes in Thailand’s output could significantly impact sugar prices.
Brazil’s Crop Challenges
Support for sugar prices has been noted as Czarnikow revised its Thailand 2024/25 sugar production estimate to 10.8 MMT from a previous forecast of 11.6 MMT. Meanwhile, Brazil has faced challenges, including drought and excessive heat, which have damaged crops. An industry group reported that fires in the top sugar-producing state of São Paulo have impacted about 80,000 hectares of sugarcane, potentially resulting in a loss of up to 5 MMT of sugarcane. Consequently, Brazil’s government crop forecasting agency, Conab, lowered its 2024/25 sugar production estimate to 44 MMT from 46 MMT.
Indian Production Also Expected to Decline
India’s Sugar Mills Association (ISMA) projects that the nation’s sugar production for 2024/25 could drop by -15% year-on-year to a five-year low of 27.27 MMT, further indicating potential reductions in global sugar availability.
USDA’s Projections for Global Sugar Production
According to the USDA’s November 21 bi-annual report, global sugar production for 2024/25 is expected to increase by +1.5% year-on-year to a record 186.619 MMT. Additionally, human sugar consumption is projected to rise by +1.2% to a new record of 179.63 MMT, even as ending stocks are expected to decline by -6.1% 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.
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