Sugar Prices Rise Amid Trade Tariff Relief and Production Forecasts

May NY world sugar #11 (SBK25) today rose by +0.28 (+1.56%), while May London ICE white sugar #5 (SWK25) increased by +10.90 (+2.12%).

Market Response to Tariff Developments

Sugar prices are trending upward today following President Trump’s announcement on Wednesday to pause reciprocal tariffs on 56 countries for 90 days. This decision alleviates fears surrounding the global trade war and has triggered short covering in sugar. Earlier on Wednesday, NY sugar hit a 5-week low, while London sugar fell to a 2-month low. Concerns about potential declines in consumer demand due to heightened tariffs had weighed heavily on the market.

Crude Oil’s Impact on Sugar Production

In related developments, Wednesday’s dip in WTI crude oil prices (CLK25) to a 4-year low is bearish for sugar. Weak crude oil prices typically suppress ethanol values, which may encourage sugar mills to focus more on sugar production from cane instead of ethanol, potentially increasing sugar supplies.

Supply Forecasts and Global Production Numbers

Recent forecasts indicate reduced global sugar production, providing some support to prices. On March 12, the Indian Sugar and Bio-energy Manufacturers Association revised its 2024/25 sugar production estimate down to 26.4 million metric tons (MMT) from 27.27 MMT, citing poor cane yields. Additionally, Unica reported a 5.3% year-over-year decline in cumulative Brazil Center-South sugar output through mid-March, totaling 39.983 MMT. Sugar trader Czarnikow also lowered its Brazil 2025/26 production estimate to 42 MMT from 43.6 MMT.

The International Sugar Organization (ISO) raised its forecast for the 2024/25 global sugar deficit to -4.88 MMT from a previous estimate of -2.51 MMT, indicating a tighter market contrasting with the 2023/24 surplus of 1.31 MMT. Furthermore, the ISO scaled back its global sugar production forecast for 2024/25 to 175.5 MMT from 179.1 MMT.

Emerging Concerns and Other Market Factors

Nonetheless, there are bearish indicators as well. Datagro projected a 6% year-over-year increase in Brazil Center-South sugar production for 2025/26, estimating it at 42.4 MMT. Similarly, Green Pool Commodity Specialists expect a swing to a surplus of +2.7 MMT in the global sugar market for the 2025/26 crop year, contradicting the deficit forecast for 2024/25.

An additional bearish factor emerged when the Indian government announced on January 20 its intention to allow sugar mills to export 1 MMT this season, relaxing previous restrictions aimed at maintaining domestic supplies. India had only permitted 6.1 MMT of sugar exports during the 2022/23 season because of these limitations. Despite this, the India Sugar Mills Association (ISMA) forecasts a 17.5% year-over-year decline in India’s 2024/25 sugar production to a 5-year low of 26.4 MMT.

Production Trends in Thailand and Brazil

Thailand’s anticipated increase in sugar production poses another concern for prices. The Office of the Cane and Sugar Board projects a significant +18% year-over-year rise to 10.35 MMT in 2024/25, up from 8.77 MMT in the 2023/24 season. Thailand stands as the world’s third-largest sugar producer and the second-largest sugar exporter.

Brazil’s sugar production faced setbacks last year due to drought and excessive heat, which caused significant crop damage. Green Pool estimates that fires may have led to the loss of as much as 5 MMT of sugar cane. In light of these challenges, Brazil’s government crop forecasting agency, Conab, reduced its 2024/25 sugar production estimate to 44 MMT, down from 46 MMT.

The USDA’s bi-annual report, released on November 21, projects a +1.5% year-over-year increase in global sugar production for 2024/25, reaching a record 186.619 MMT. This report also anticipates a +1.2% rise in human sugar consumption to a record 179.63 MMT, while forecasting a -6.1% decrease in global sugar ending stocks 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.