Sugar Prices Decline Amid Global Trade Concerns and Production Forecasts

May NY world sugar #11 (SBK25) fell by -0.36 (-1.97%), while May London ICE white sugar #5 (SWK25) decreased by -9.20 (-1.76%) today. Both markets are experiencing downward pressure, with NY sugar reaching a 5-week low and London sugar hitting a 2-month low.

The drop in sugar prices is largely attributed to growing fears surrounding a global trade war. Analysts are concerned that increased tariffs may reduce overall consumer demand for sugar in the U.S., thus exacerbating the prices. This combination of factors is weighing heavily on market sentiment.

Furthermore, the recent decline in WTI crude oil (CLK25) to a 4-year low adds a bearish sentiment toward sugar. Lower crude oil prices typically undermine ethanol prices, which could lead sugar mills to prioritize sugar production over ethanol, consequently raising sugar supply levels.

Brazilian Factors Impacting Sugar Prices

Another factor affecting sugar prices is the weakening Brazilian real (^USDBRL), which today fell to a 2-3/4 month low against the dollar. This decline encourages Brazil’s sugar producers to increase exports, further exerting pressure on global sugar prices.

Global Production Insights

On a more supportive note for sugar prices, indications of reduced global sugar production are emerging. Recently, on March 12, the Indian Sugar and Bio-energy Manufacturers Association adjusted its 2024/25 sugar production forecast downward to 26.4 MMT, down from a previous estimate of 27.27 MMT due to lower cane yields. Additionally, Unica reported that the cumulative sugar output in Brazil’s Center-South region for the 2024/25 season is down by 5.3% year-on-year, totaling 39.983 MMT.

Moreover, Czarnikow, a sugar trading firm, revised its Brazil 2025/26 sugar production estimate down to 42 MMT from 43.6 MMT noted in February. In contrast, the International Sugar Organization (ISO) raised its 2024/25 global sugar deficit forecast to -4.88 MMT from a prior forecast of -2.51 MMT. This reflects a tightening market compared to the 2023/24 surplus of 1.31 MMT and includes a cut to the 2024/25 global sugar production estimate to 175.5 MMT from 179.1 MMT made in November.

Future Production Projections

On the bearish side, Datagro projected a +6% year-on-year increase in Brazil’s Center-South sugar production for the 2025/26 season, estimating it at 42.4 MMT. Green Pool Commodity Specialists have also estimated a global sugar surplus of +2.7 MMT for the 2025/26 crop year, shifting from a deficit of -3.7 MMT anticipated in 2024/25.

The Indian government recently announced on January 20 its decision to allow sugar mills to export 1 MMT of sugar this season, easing restrictions that had been in place. Previously, India limited sugar exports since October 2023 to safeguard domestic supplies. In the 2022/23 season, mills were allowed to export only 6.1 MMT, a significant decrease from the record 11.1 MMT in the prior season. However, the Indian Sugar Mills Association (ISMA) predicts a -17.5% year-on-year drop in India’s 2024/25 sugar production to a 5-year low of 26.4 MMT.

Meanwhile, Thailand’s sugar output forecast adds further bearish sentiment. The Office of the Cane and Sugar Board in Thailand anticipates an +18% year-on-year increase for the 2024/25 sugar production season, estimating production at 10.35 MMT, up from 8.77 MMT in the previous season. As the world’s third-largest sugar producer and second-largest exporter, Thailand’s increased output will impact global supply dynamics.

Last year, Brazil’s sugar crops suffered due to drought and excessive heat, leading to considerable crop losses from rampant fires. Green Pool Commodity Specialists estimated that up to 5 MMT of sugarcane may have been lost. As a result, Brazil’s government crop forecasting agency, Conab, recently reduced its 2024/25 sugar production estimate to 44 MMT from 46 MMT due to anticipated lower sugarcane yields.

The USDA’s bi-annual report, released on November 21, projects a +1.5% year-on-year increase in global 2024/25 sugar production, reaching a record of 186.619 MMT. Concurrently, global sugar consumption is expected to rise by +1.2% year-on-year to reach 179.63 MMT. The USDA also forecasts a decline of -6.1% year-on-year in global sugar ending stocks to 45.427 MMT.

On the date of publication, Rich Asplund did not hold (either directly or indirectly) any positions in the securities mentioned in this article. All information presented in this article is for informational purposes only. For further details, please review the Barchart Disclosure Policy here.

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