Sugar Prices Decline Amid Demand Concerns and Tariff Impacts

May NY world sugar #11 (SBK25) has dropped by -0.16 (-0.88%), while May London ICE white sugar #5 (SWK25) fell by -2.80 (-0.53%).

Market Dynamics: Demand and Trade Tensions

Today, sugar prices reversed an early rise, largely due to worries about declining consumer demand. The New York sugar market hit a 5-week low, while London sugar slid to a 2-month low. These shifts stem from fears that escalating global trade tensions will decrease demand, as tariffs increase consumer prices. China reacted today by raising tariffs on all US goods to 125% from 84% after the US raised tariffs on Chinese imports to 145%. Initially, sugar prices rose after the dollar index (DXY00) fell to a 3-year low, which typically boosts commodity prices.

Crude Oil Influence on Sugar Production

Furthermore, the dip in WTI crude oil (CLK25) to a 4-year low also negatively affects sugar prices. Lower crude prices can lead to a drop in ethanol prices, which may drive sugar mills to shift more cane crushing towards sugar production instead of ethanol, potentially increasing sugar supply.

Production Forecasts and Market Adjustments

Despite these bearish trends, there are signs of decreased global sugar production that could lend some support to prices. The Indian Sugar and Bio-energy Manufacturers Association recently lowered its sugar production forecast for 2024/25 to 26.4 MMT from a previous estimate of 27.27 MMT, citing reduced cane yields. Additionally, Unica reported that Brazil’s sugar output for the 2024/25 crop year decreased by 5.3% year-on-year to 39.983 MMT. Sugar trader Czarnikow has also revised Brazil’s 2025/26 production estimate down to 42 MMT, from 43.6 MMT in February.

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

Challenges and Opportunities in Sugar Production

However, some challenges remain. Consultant Datagro has forecasted that Brazil’s sugar production in 2025/26 would increase by +6% to reach 42.4 MMT. Similarly, Green Pool Commodity Specialists suggest a global shift towards a sugar surplus of +2.7 MMT for the 2025/26 crop year, moving from a prior forecast of a deficit of -3.7 MMT for 2024/25.

The Indian government recently announced an allowance for its sugar mills to export 1 MMT of sugar this season, relaxing strict export limits imposed since October 2023. In the previous season, India’s mills exported only 6.1 MMT of sugar compared to a record 11.1 MMT in the preceding year. Despite this, the India Sugar Mills Association (ISMA) warns that sugar production may drop -17.5% year-on-year to a 5-year low of 26.4 MMT in 2024/25.

Regional Production Forecasts and Impacts

Additionally, Thailand’s sugar production outlook is bearish for sugar prices, with the Office of the Cane and Sugar Board predicting an 18% year-on-year increase for the 2024/25 production season, projecting a total of 10.35 MMT. Thailand is the world’s third-largest sugar producer and the second-largest exporter.

Brazil’s sugar crops have faced challenges too, with drought and excessive heat from last year resulting in substantial crop losses. Green Pool Commodity Specialists noted that approximately 5 MMT of sugar cane may have been lost due to fires, leading Brazil’s crop forecasting agency, Conab, to reduce its sugar production estimate for 2024/25 to 44 MMT, down from 46 MMT.

The USDA’s bi-annual report released on November 21 predicts that global sugar production for 2024/25 will rise by +1.5% year-on-year to 186.619 MMT, along with global human sugar consumption projected to increase by +1.2% to a record 179.63 MMT. Furthermore, the USDA forecasts a decline of -6.1% year-on-year in global ending stocks for 2024/25, estimating them at 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.
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