Sugar Prices Decline Amid Brazilian Real Weakness and Global Concerns

May NY world sugar #11 (SBK25) is down -0.28 (-1.50%), while May London ICE white sugar #5 (SWK25) has dropped -8.30 (-1.55%).

Declining Prices Driven by Currency and Trade Concerns

Sugar prices have fallen to four-week lows, primarily due to the weakness of the Brazilian real (^USDBRL). The real reached a two-and-a-half month low against the dollar today, which encourages export selling by Brazil’s sugar producers.

Additionally, fears surrounding a global trade war are impacting sugar prices. There is concern that escalating trade tensions could dampen consumer demand for sugar as tariffs can lead to increased prices. Compounding the issue, Monday’s decline in WTI crude oil (CLK25) to a four-year low is bearish for sugar prices. The weakness in crude oil affects ethanol prices, likely prompting sugar mills to prioritize sugar production over ethanol, which could increase sugar supplies.

Supportive Signs for Sugar Prices from Production Forecasts

Despite this bearish outlook, there are signs of decreasing global sugar production that may support prices. On March 12, the Indian Sugar and Bio-energy Manufacturers Association reduced its 2024/25 sugar production forecast for India to 26.4 million metric tons (MMT), down from a January forecast of 27.27 MMT, citing lower cane yields. Last Thursday, Unica reported that Brazil’s Center-South cumulative sugar output for 2024/25, through mid-March, decreased by 5.3% year-on-year to 39.983 MMT. Additionally, sugar trader Czarnikow amended its Brazil 2025/26 sugar production estimate, lowering it to 42 MMT from a previous estimate of 43.6 MMT in February.

Moreover, the International Sugar Organization (ISO) revised its 2024/25 global sugar deficit forecast to -4.88 MMT from -2.51 MMT in November, indicating a tightening market compared to the 2023/24 global sugar surplus of 1.31 MMT. The ISO also lowered its global sugar production projection for 2024/25 to 175.5 MMT from 179.1 MMT.

Potential Bearish Factors in Global Sugar Market

On the bear side of the market, consultancy Datagro projected on March 12 that Brazil’s Center-South sugar production would rise by 6% in 2025/26 to 42.4 MMT. Additionally, Green Pool Commodity Specialists forecast that the worldwide sugar market could transition to a surplus, with an expected production increase of 2.7 MMT in the 2025/26 crop year, reversing its earlier projection of a deficit of 3.7 MMT in 2024/25.

Adding to bearish sentiment, the Indian government announced on January 20 that it would permit its sugar mills to export 1 MMT of sugar this season, easing restrictions that had been imposed since October 2023 in an effort to ensure sufficient domestic supplies. In the previous season, India allowed only 6.1 MMT of sugar exports, down drastically from the record 11.1 MMT exported in the preceding year. However, the India Sugar Mills Association (ISMA) anticipates a 17.5% year-on-year decline in India’s 2024/25 sugar production, predicting a five-year low at 26.4 MMT.

Impacts of Weather on Sugar Production

The outlook for increased sugar production in Thailand also poses a threat to sugar prices. Thailand’s Office of the Cane and Sugar Board projected on October 29 that sugar production for 2024/25 could rise by 18% year-on-year to 10.35 MMT. This follows the production of 8.77 MMT in the 2023/24 season. With Thailand being the third largest sugar producer globally and the second largest exporter, this forecast could contribute to increased market supply.

Brazil’s sugar crops were further affected by drought and excessive heat last year, which resulted in fires that damaged crops in São Paulo, the leading sugar-producing state. Green Pool Commodity Specialists reported possible losses of around 5 MMT of sugar cane due to these fires. Consequently, Conab, Brazil’s government crop forecasting agency, revised its 2024/25 Brazil sugar production estimate to 44 MMT, down from a previous forecast of 46 MMT due to lower cane yields.

The USDA’s bi-annual report released on November 21 projected a 1.5% year-on-year increase in global sugar production for 2024/25, forecasting a record 186.619 MMT. It also predicts a 1.2% increase in global sugar consumption, reaching a record 179.63 MMT. Moreover, the USDA anticipates that 2024/25 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 are solely for informational purposes. For more information, please view the Barchart Disclosure Policy here.

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