Sugar Prices Decline Amid Demand Concerns and Production Forecasts

May NY world sugar #11 (SBK25) dropped -0.35 (-1.93%), while August London ICE white sugar #5 (SWQ25) fell -9.00 (-1.75%).

Market Influences on Sugar Prices

Sugar prices are facing significant declines due to concerns about demand. Green Pool Commodity Specialists reported that the number of outstanding contracts in NY May sugar futures set to expire on Wednesday indicates a large delivery, signaling weakened demand for sugar.

Additionally, expectations of increased sugar production in Brazil are contributing to downward pressure on prices. The USDA’s Foreign Agricultural Service (FAS) recently predicted a 2.3% year-over-year increase in Brazil’s sugar production for the 2025/26 season, expected to reach 44.7 million metric tons (MMT), up from 43.7 MMT.

Recent Market Trends

Sugar prices have been under pressure recently, with NY sugar hitting a 2.5-year low on April 15 and London sugar reaching a 3-month low on April 16. The anticipated abundant rains in India could lead to significant sugar crop yields. On April 15, the India’s Ministry of Earth Sciences projected the coming monsoon would bring rainfall at 105% of the long-term average, affecting the sugar market.

On another front, consultant Datagro also forecast in March that Brazil’s Center-South sugar production for 2025/26 would rise by 6% year-over-year to 42.4 MMT. Green Pool noted that the global sugar market is expected to shift from a deficit of 3.7 MMT in 2024/25 to a surplus of 2.7 MMT in 2025/26.

Export Policies and Production Reports

India’s sugar mills have been allowed to export 1 MMT of sugar this season, easing restrictions placed in 2023 to maintain domestic supplies. In the 2022/23 season, India’s mills could export only 6.1 MMT, significantly less than the previous year’s record of 11.1 MMT. However, the Indian Sugar Mills Association (ISMA) anticipates that India’s 2024/25 sugar production will drop by 17.5% year-over-year to a five-year low of 26.4 MMT.

Further complicating the supply outlook, Thailand’s Office of the Cane and Sugar Board reported that the country’s 2024/25 sugar production surged by 14% year-over-year to 10.00 MMT. As the world’s third-largest sugar producer, Thailand’s increased output may add further bearish sentiment to global sugar prices.

Global Market Dynamics

Despite the downturn, sugar prices received some support from April 17 reports indicating a decline in India’s sugar production from October 1 to April 15, registering 25.5 MMT, a drop of 18% from the previous year.

On the global stage, Unica reported a cumulative decrease of 5.3% in Brazil’s Center-South sugar output through March, totaling 40.169 MMT for the 2024/25 season. The ISMA also revised its 2024/25 India sugar production forecast down to 26.4 MMT due to declining cane yields.

In a key forecast, the International Sugar Organization (ISO) on March 6 increased its 2024/25 global sugar deficit estimate to -4.88 MMT from a prior estimate of -2.51 MMT. This situation marks a transition from the 2023/24 global sugar surplus of 1.31 MMT. Additionally, the ISO reduced its global production forecast for 2024/25 to 175.5 MMT, down from 179.1 MMT.

Last year, drought and severe heat in Brazil caused fires that damaged sugar crops, resulting in an estimated loss of up to 5 MMT of sugarcane. Brazil’s government crop forecasting agency, Conab, projected a 3.4% year-over-year decline in sugar production for 2024/25, estimating output at 44.118 MMT due to adverse weather conditions.

USDA Projections

The USDA has forecast a 1.5% year-over-year increase in global sugar production for the 2024/25 season, projecting a total of 186.619 MMT. It also estimates that human sugar consumption will rise by 1.2% in the same period, reaching a new high of 179.63 MMT. Moreover, the USDA expects global ending stocks to decline by 6.1% year-over-year to 45.427 MMT.

On the date of publication, Rich Asplund did not hold any positions in the securities mentioned in this article. All information and data in this article are for informational purposes only. For more details, view the Barchart Disclosure Policy.

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