Sugar Prices Show Modest Gains Amid Fluctuating Market Dynamics

May NY world sugar #11 (SBK25) is experiencing a rise of +0.26 (+1.43%), while May London ICE white sugar #5 (SWK25) has increased by +8.60 (+1.66%).

Today’s surge in sugar prices can be attributed to a decline in the dollar index (DXY00), which has reached a 4-month low. This downturn has prompted short covering in sugar futures, reflecting cautious optimism in the market.

Recent Market Trends and Price Movements

Last Thursday marked a decline in sugar prices, which fell to six-week lows due to concerns over demand amidst abundant supplies. The situation worsened as sugar traders Wilmar International Ltd and Sucres et Denrees SA recorded a record delivery of 1.7 million metric tons (MMT) of raw sugar against the March NY futures contract that expired last Friday. Such large deliveries are often viewed as bearish for prices, indicating a shortage of alternative markets for sellers.

Prior to this, sugar prices faced pressure beginning last Wednesday when Czarnikow, a sugar trader, projected a record increase in Brazil’s 2025/26 sugar production to 43.6 MMT. The shift in production focus, favoring sugar over ethanol, points to increased supply on the horizon.

Global Supply and Demand Factors

Adding to the complexity, the International Sugar Organization (ISO) revised its global sugar deficit forecast for 2024/25 to -4.88 MMT, up from the previous projection of -2.51 MMT. This change highlights a tightening market following a surplus of 1.31 MMT in 2023/24. Additionally, the ISO cut its 2024/25 global sugar production forecast to 175.5 MMT from 179.1 MMT initially expected. Notably, Green Pool Commodity Specialists foresee a shift to a global surplus of +2.7 MMT in 2025/26, contrasting with their previous estimate of a deficit of -3.7 MMT for 2024/25.

Sugar prices found some support from news released last Friday that India’s sugar production had fallen by 14% year-over-year to 21.98 MMT for the marketing year-to-date, covering October 1 through February 28, as per the India Sugar and Bio-Energy Manufacturers Association.

India’s Export Policies and Production Forecasts

However, a bearish factor emerged on January 20 when the Indian government announced that it would permit sugar mills to export 1 MMT of sugar this season, easing previously imposed restrictions. Since October 2023, India has sought to maintain domestic supplies, allowing only 6.1 MMT of exports during the 2022/23 season, following a record 11.1 MMT in the previous season. Looking forward, the India Sugar Mills Association (ISMA) predicts that India’s 2024/25 sugar production will decline by 15% year-over-year to a five-year low of 27.27 MMT.

Regional Production Outlooks and Impact on Prices

In terms of regional influences, the outlook for increased sugar production in Thailand appears bearish for prices. On October 29, Thailand’s Office of the Cane and Sugar Board estimated that production would increase by 18% year-over-year to 10.35 MMT, following a production level of 8.77 MMT in the prior season. As the world’s third-largest sugar producer and second-largest exporter, Thailand’s output will be closely monitored.

Climate challenges have impacted Brazil’s crop yields, with drought and excessive heat causing destruction of sugar crops in the São Paulo region. Green Pool Commodity Specialists estimated that as much as 5 MMT of sugar cane may have been lost due to these fires. Consequently, Brazil’s governmental crop forecasting agency, Conab, has revised the 2024/25 sugar production estimate downward from 46 MMT to 44 MMT, attributing the cut to lower sugarcane yields.

In its bi-annual report released on November 21, the USDA projected a 1.5% increase in global 2024/25 sugar production to a record 186.619 MMT, while human sugar consumption is anticipated to rise by 1.2% to a record 179.63 MMT. Furthermore, the USDA forecasts a decline of 6.1% in global 2024/25 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.

 

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