Sugar Prices Climb as Market Factors Shift
Crude Oil Rally and Global Production Concerns Impact Sweet Commodity
March NY world sugar #11 (SBH25) is up +0.11 (+0.51%), while March London ICE white sugar #5 (SWH25) sees an increase of +4.40 (+0.79%).
Today, sugar prices are trending upward, boosted by crude oil prices (CLF25) which have jumped more than +1% to reach a 2-week high. Rising crude costs enhance the appeal of ethanol, potentially leading sugar mills worldwide to favor ethanol production over sugar, thus reducing sugar availability.
On Thursday, sugar prices dipped to one-week lows after the International Sugar Organization (ISO) revised its forecast for the global sugar deficit in 2024/25 down to -2.51 MMT from an earlier estimate of -3.58 MMT made in August. Additionally, the ISO revised its 2023/24 global sugar surplus forecast upward, raising it to 1.31 MMT compared to the previous estimate of +200,000 MT.
Earlier in the week, sugar prices surged to two-week highs driven by a projection from Wilmar International, which warned that the number of inactive sugar mills in Brazil is expected to rise from 38 to over 100 this month, significantly decreasing the country’s sugar production. This seasonal trend occurs as Brazilian sugar mills typically close during the wetter months of December and January, reopening as early as March, depending on the weather. However, recent heavy rainfall has caused mills to shut down sooner than anticipated.
In another development, the outlook for increased sugar production in Thailand might weigh on sugar prices. Thailand’s Office of the Cane and Sugar Board projected an 18% year-on-year increase in sugar production for 2024/25, forecasting a rise to 10.35 MMT. Last season, Thailand produced 8.77 MMT of sugar, reinforcing its status as the world’s third-largest producer and second-largest exporter.
A report from Unica revealed a decline in sugar output in Brazil’s Center-South region during the latter half of October, which fell by 24.3% year-on-year to 1.785 MMT. In contrast, cumulative sugar production for 2024/25 through October increased by 0.3% year-on-year to 37 MMT.
Drought and extreme heat incidents have caused significant crop damage in Brazil, particularly in São Paulo, the nation’s leading sugar-producing state. Orplana, a sugar cane industry group, indicated that around 2,000 fire outbreaks have affected up to 80,000 hectares of sugarcane. Green Pool Commodity Specialists estimate that losses could reach as much as 5 MMT from these fires. Citing the impact of these factors, Conab reduced its estimate for Brazil’s Center-South sugar production for 2024/25 from 42.7 MMT to 42 MMT. Similarly, Rabobank cut its forecast from 40.3 MMT to 39.3 MMT, while Datagro revised its estimate down to 38.7 MMT.
Support for sugar prices was bolstered when India’s Food Ministry lifted restrictions on sugar mills producing ethanol for the upcoming 2024/25 year starting in November. This move might extend India’s curbs on sugar exports. Last December, the government halted the use of sugarcane for ethanol production for the 2023/24 supply year to safeguard sugar reserves. India managed to export only 6.1 MMT of sugar during the 2022/23 season, a decrease from the record 11.1 MMT the prior season. As of October 3, the Indian Sugar and Bio-energy Manufacturers Association (ISM) announced India would have 2 MMT of sugar available for export in the upcoming season and urged the government to end current export restrictions.
The ISM also reported a fall in India’s sugar production for the 2023/24 period from October through April, which decreased by 1.6% year-on-year to 31.4 MMT. Furthermore, the ISM projected a 2% decline in India’s 2024/25 sugar production to 33.3 MMT, and lowered the expected sugar reserves for 2023/24 to 8.4 MMT, down from a previous estimate of 9.1 MMT in May.
In a broader perspective, the ISO forecasted on August 30 that global sugar production for 2024/25 would be 179.3 MMT, a 1.1% decrease year-on-year from 181.3 MMT in 2023/24. Meanwhile, a report from the USDA projected that worldwide sugar production for 2024/25 would increase by 1.5% year-on-year to a record 186.619 MMT, with human sugar consumption also anticipated to reach a new high of 179.63 MMT. Furthermore, ending stocks for sugar are expected to decline by 6.1% year-on-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.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
