Sugar Prices Decline as Global Trade Concerns Loom

On Wednesday, May NY world sugar #11 (SBK25) closed down -0.40 (-1.18%), and May London ICE white sugar #5 (SWK25) closed down -9.90 (-1.89%).

Moderate losses marked sugar prices on Wednesday, with NY sugar falling to a five-week low and London sugar dropping to a two-month low. The ongoing fears surrounding global trade wars contribute to this decline, as concerns about reduced consumer demand for sugar arise amid potential tariff increases affecting US consumers.

Additionally, the bearish trend in sugar prices was influenced by a drop in WTI crude oil (CLK25) to a four-year low. This decline in crude oil prices generally weakens ethanol prices, prompting sugar mills to shift more focus from ethanol production to sugar production, thereby increasing sugar supplies.

Production Forecasts Impacting Sugar Market

Conversely, signs indicating lower global sugar production are providing some support for prices. On March 12, the Indian Sugar and Bio-energy Manufacturers Association revised its 2024/25 India sugar production forecast down to 26.4 million metric tons (MMT) from the previous estimate of 27.27 MMT, citing lower cane yields. Furthermore, last Thursday, Unica reported a 5.3% year-on-year decrease in cumulative Brazil Center-South sugar output for 2024/25 through mid-March, now at 39.983 MMT. Sugar trader Czarnikow also lowered its Brazil 2025/26 sugar production estimate to 42 MMT from the prior forecast of 43.6 MMT.

In a related development, the International Sugar Organization (ISO) on March 6 increased its 2024/25 global sugar deficit forecast to -4.88 MMT from a November prediction of -2.51 MMT, indicating a tightening market transition from a 2023/24 global sugar surplus of 1.31 MMT. The ISO also cut its global sugar production outlook for 2024/25 to 175.5 MMT from the earlier forecast of 179.1 MMT.

Conflicting Projections and Production Restrictions

On the bearish side, analyst Datagro projected on March 12 that 2025/26 Brazil Center-South sugar production could rise by 6% year-on-year, reaching 42.4 MMT. Additionally, Green Pool Commodity Specialists forecasted a shift in the worldwide sugar market to a surplus of 2.7 MMT in the 2025/26 crop year, contrasting its previous estimate of a deficit of -3.7 MMT for 2024/25.

Another bearish factor emerged on January 20 when the Indian government announced it would permit sugar mills to export 1 MMT of sugar this season, easing previously imposed restrictions. India had limited sugar exports since October 2023 to ensure sufficient domestic supplies. During the 2022/23 season, only 6.1 MMT of sugar was exported after the export of a record 11.1 MMT in the prior season. However, the India Sugar Mills Association (ISMA) predicts that India’s sugar production for 2024/25 will fall by 17.5% year-on-year, reaching a five-year low of 26.4 MMT.

Thailand’s Production Outlook and Brazil Challenges

The outlook for increased sugar production in Thailand adds a bearish sentiment to sugar prices. The Office of the Cane and Sugar Board projected on October 29 that Thailand’s 2024/25 sugar production would increase by 18% year-on-year to 10.35 MMT. Thailand, which produced 8.77 MMT in the 2023/24 season that concluded in April, ranks as the world’s third-largest sugar producer and the second-largest sugar exporter.

Last year’s drought and extreme heat in Brazil led to significant crop damage in São Paulo, the country’s top sugar-producing state. Green Pool Commodity Specialists noted that as much as 5 MMT of sugarcane may have been lost due to these fires. Consequently, Brazil’s government crop forecasting agency, Conab, revised its 2024/25 sugar production estimate down to 44 MMT from a previous 46 MMT, attributing this to lower sugarcane yields.

The USDA’s bi-annual report released on November 21 projected that global sugar production for 2024/25 would rise by 1.5% year-on-year to a record 186.619 MMT, while human sugar consumption would increase by 1.2% year-on-year to a record 179.63 MMT. Furthermore, the USDA anticipates that global sugar ending stocks will decrease 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.