Sugar Prices Dip as Global Supply Forecasts Improve
Recent Reports Calm Supply Worries Amid Mixed Market Signals
March NY world sugar #11 (SBH25) ended Monday’s session down -0.21 (-0.98%), while March London ICE white sugar #5 (SWH25) closed down -8.00 (-1.45%).
On Monday, sugar prices fell to their lowest level in a week due to easing concerns about global supply. The International Sugar Organization (ISO) had lowered its forecast for the 2024/25 global sugar deficit from -3.58 MMT to -2.51 MMT. In a contrasting move, the ISO raised its global sugar surplus estimate for 2023/24 to 1.31 MMT from an earlier projection of +200,000 MT.
Crude oil prices also played a role in sugar’s decline. West Texas Intermediate (WTI) crude (CLF25) fell by more than -3% on Monday. This decrease may lead sugar mills to focus more on sugar production rather than ethanol, consequently increasing sugar supplies.
Last week, sugar prices made a temporary spike, reaching two-week highs. This rally was based on Wilmar International’s predictions that the number of sugar mills in Brazil closing this month, currently at 38, could more than triple, significantly impacting the country’s sugar output. Mills in Brazil generally halt their cane processing during the wet months of December and January, potentially resuming in March, depending on weather conditions. However, unexpected heavy rains in Brazil this month have prompted earlier closures than anticipated.
Sugar prices are facing additional pressure from anticipated higher production levels in Thailand. On October 29, the Office of the Cane and Sugar Board in Thailand predicted an 18% year-on-year increase in sugar production for 2024/25, reaching 10.35 MMT. For context, Thailand produced 8.77 MMT of sugar in the 2023/24 season that concluded in April. As the world’s third-largest sugar producer, Thailand plays a significant role in the global sugar market.
Brazil’s sugar output saw support from a report by Unica, which revealed that production in the Center-South region during the latter half of October dropped by 24.3% year-on-year to 1.785 MMT. Notably, cumulative sugar output in this region for the 2024/25 season through October increased slightly by 0.3% year-on-year, totaling 37 MMT.
Natural disasters in Brazil have compounded challenges for sugar producers. Drought and extreme heat resulted in widespread fires in São Paulo, Brazil’s leading sugar-producing state. The sugar cane industry group Orplana reported approximately 2,000 fires affecting around 80,000 hectares of sugarcane. Green Pool Commodity Specialists estimated a loss of up to 5 MMT of sugarcane due to these fires. Various forecasts by organizations like Conab and Rabobank reflected declines in expected sugar production for the 2024/25 season due to these adverse conditions.
In a factor supporting sugar prices, India’s Food Ministry lifted restrictions on sugar mills producing ethanol for the 2024/25 year starting in November. This move may elongate India’s sugar export limits. In December 2023, restrictions were imposed to bolster domestic sugar reserves. Subsequently, India only allowed 6.1 MMT of sugar exports in the 2022/23 season, down from a record 11.1 MMT in the prior season. However, the Indian Sugar and Bio-energy Manufacturers Association (ISM) recently indicated that 2 MMT of sugar could be available for export next season, appealing to the government to lift existing restrictions.
Additionally, the ISM reported a 1.6% drop in India’s sugar production from October to April for the 2023/24 season, totaling 31.4 MMT. It also projected a further decline of 2% year-on-year for 2024/25 to 33.3 MMT, while sugar reserves were forecasted to be at 8.4 MMT on September 30, down from a May estimate of 9.1 MMT.
Further supporting factors for sugar prices, the ISO estimated global sugar production for 2024/25 at 179.3 MMT, a decrease of 1.1% from 181.3 MMT in the previous year. However, the USDA’s bi-annual report, released Thursday, projected an increase in global sugar production of 1.5% year-on-year to a record 186.619 MMT, with human sugar consumption also on the rise, forecasted to reach a record 179.63 MMT in the 2024/25 period. The USDA noted that global sugar ending stocks would 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.
