Sugar Prices Hit Six-Week Lows Amid Demand Concerns
On Thursday, May NY world sugar #11 (SBK25) closed down -0.07 (-0.38%), while May London ICE white sugar #5 (SWK25) finished down -5.10 (-0.98%). The decline in sugar prices marked a six-week low due to rising concerns over demand amid abundant supply.
Demand issues have intensified following the record delivery of 1.7 million metric tons (MMT) of raw sugar against the March NY futures contract, executed by sugar traders Wilmar International Ltd and Sucres et Denrees SA. Such large deliveries typically signal a bearish outlook for prices, indicating sellers have limited viable markets for their product.
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Last Wednesday, sugar prices were already facing pressure after Czarnikow projected Brazil’s sugar production for the 2025/26 crop year would rise to a record 43.6 MMT, noting that producing sugar is currently more profitable than ethanol. This outlook adds more supply to an already oversupplied market.
Simultaneously, the International Sugar Organization (ISO) adjusted its global sugar deficit forecast for 2024/25 from -2.51 MMT in November to -4.88 MMT last Thursday. This forecast reflects a tightening market compared to the 2023/24 global sugar surplus of 1.31 MMT. The ISO also lowered its 2024/25 global sugar production estimate to 175.5 MMT from 179.1 MMT previously.
In contrast, on February 5, Green Pool Commodity Specialists indicated that the global sugar market might shift to a surplus of +2.7 MMT for the 2025/26 crop year, reversing its previous estimate of a deficit of -3.7 MMT for 2024/25.
Notably, sugar prices had surged to a 2-3/4 month high last Tuesday, extending the rally that began in mid-January. During this period, the Brazilian real (^USDBRL) strengthened significantly against the US dollar, leading to reduced export activities from Brazil’s producers and prompting substantial fund short-covering in the sugar futures market.
Support for sugar prices came from reports indicating that India’s sugar production had dropped -14% year-over-year to 21.98 MMT from October 1 through February 28, as reported by the India Sugar and Bio-Energy Manufacturers Association.
However, the Indian government’s recent decision to permit its sugar mills to export 1 MMT this season may exert additional downward pressure on prices. India has controlled sugar exports since October 2023 to ensure sufficient domestic reserves. Last season, India exported only 6.1 MMT of sugar after allowing a record 11.1 MMT in the previous year. The India Sugar Mills Association (ISMA) notably predicts a -15% year-over-year decline in India’s 2024/25 sugar production, estimating it will fall to a five-year low of 27.27 MMT.
Looking ahead, an anticipated increase in sugar production in Thailand also contributes to bearish sentiments for sugar prices. The Office of the Cane and Sugar Board in Thailand expects sugar output for the 2024/25 crop year to swell by +18% year-over-year to 10.35 MMT, up from 8.77 MMT in the 2023/24 season. As the world’s third-largest sugar producer and second-largest exporter, Thailand’s production capabilities significantly influence global markets.
Natural disasters have also impacted supply dynamics. Last year’s drought and excessive heat in Brazil caused substantial damage to sugar crops, especially in the key producing region of São Paulo. Reports suggest approximately 5 MMT of sugar cane could have been lost due to the fires. In response, Brazil’s government crop forecasting agency, Conab, has reduced its 2024/25 sugar production estimate from 46 MMT to 44 MMT, citing lower yields from the adverse weather conditions. As of mid-February, cumulative sugar output from Brazil’s Center-South region fell -5.6% year-over-year to 39.812 MMT.
Additionally, the USDA’s biannual report, released on November 21, forecasted that global sugar production for 2024/25 would increase by +1.5% year-over-year, reaching a record 186.619 MMT. It also predicted a +1.2% rise in global human sugar consumption to a new high of 179.63 MMT. Ending stocks for global sugar were anticipated to decline by -6.1% year-over-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.
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