Sugar Prices Decline Amid Rising Production and Demand Concerns

On Monday, May NY world sugar #11 (SBK25) closed down -0.34 (-1.87%), while August London ICE white sugar #5 (SWQ25) fell -8.70 (-1.69%). This retreat in sugar prices is linked to growing concerns about demand.

Demand Weakens as Delivery Rumors Emerge

Green Pool Commodity Specialists reported that the volume of outstanding contracts in NY May sugar futures is rising, indicating a substantial delivery against those contracts. This trend points to weakened demand for sugar.

Forecasts for Brazil and India Impact Sugar Market

Additionally, expectations for a larger sugar output in Brazil are weighing on prices. Last Wednesday, the USDA’s Foreign Agricultural Service (FAS) predicted that Brazil’s sugar production for 2025/26 would increase by 2.3% year-over-year to 44.7 million metric tons (MMT), up from 43.7 MMT the previous season.

In recent weeks, sugar prices have been under pressure, with NY sugar reaching a 2.5-year low on April 15 and London sugar hitting a 3-month low the following day. Projections of heavy rainfall in India, expected to contribute to a bumper crop, are also negatively affecting sugar prices. India’s Ministry of Earth Sciences forecasts the 2023 monsoon to be 105% of the long-term average.

India’s Export Policies Influence Market

Moreover, the Indian government announced on January 20 that it would permit sugar mills to export 1 MMT this season, reflecting a relaxation of prior export restrictions. Since October 2023, India has limited sugar exports to ensure adequate domestic supply. During the 2022/23 season, only 6.1 MMT were exported, a sharp drop from the record 11.1 MMT in the previous season. The Indian Sugar Mills Association (ISMA) projects that sugar production in India for 2024/25 will decline by 17.5% to a five-year low of 26.4 MMT.

Thailand and Global Production Trends

The outlook for higher sugar production in Thailand is also bearish. Thailand’s Office of the Cane and Sugar Board reported an impressive 14% year-over-year increase for the 2024/25 season, reaching 10.00 MMT. As the world’s third-largest sugar producer and second-largest exporter, Thailand’s increase contributes further to global supply concerns.

However, carryover support for sugar prices was noted in a recent report by the ISMA, stating that India’s sugar production from October 1 to April 15 was 25.5 MMT, down 18% compared to last year.

Global Supply Adjustments

Other signs of reduced global sugar production may provide some price support. On April 14, Unica reported that cumulative sugar output in Brazil’s Center-South fell by 5.3% year-over-year to 40.169 MMT through March. Additionally, the Indian Sugar and Bio-Energy Manufacturers Association reduced its 2024/25 forecast for India’s sugar production to 26.4 MMT, down from a previous estimate of 27.27 MMT, citing lower cane yields.

The International Sugar Organization (ISO) adjusted its global sugar deficit forecast for 2024/25 to -4.88 MMT from a previous estimate of -2.51 MMT. This indicates a tightening market compared to the 1.31 MMT surplus recorded in the 2023/24 season. The ISO has also cut its 2024/25 global sugar production forecast to 175.5 MMT, down from 179.1 MMT.

Weather Impacts Production in Brazil

Last year’s drought and excessive heat led to severe crop damage in Brazil, particularly in São Paulo, the country’s top sugar-producing state. Green Pool Commodity Specialists noted that fires may have destroyed up to 5 MMT of sugarcane. Recently, Conab, Brazil’s government crop forecasting agency, projected a 3.4% annual decline in Brazil’s sugar production for 2024/25, estimating it at 44.118 MMT due to these adverse growing conditions.

USDA Projections for Global Sugar Market

The USDA’s November 21 bi-annual report projected a global sugar production increase of 1.5% year-over-year to a record 186.619 MMT for 2024/25. The report also anticipates human sugar consumption to rise by 1.2% to a record 179.63 MMT, while global ending stocks are expected to decline by 6.1% 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.
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The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.