Global Sugar Prices Drop Amid Improved Production Forecasts
On Monday, March NY world sugar #11 (SBH25) closed down -0.32 (-1.66%), while March London ICE white sugar #5 (SWH25) fell by -7.10 (-1.41%).
Sugar prices saw a decline on Monday, marking a four-month low for NY sugar futures and a 2¾-year low for London sugar. A rise in the dollar index (DXY00) to a two-year high has had a negative impact on many commodities, including sugar. Over the last three months, the outlook for sugar has improved, pushing prices lower. Notably, on November 21, the International Sugar Organization (ISO) revised its global sugar deficit forecast for 2024/25 to -2.51 MMT from the previous estimate of -3.58 MMT in August. Additionally, the ISO raised its forecast for a global sugar surplus in 2023/24 to 1.31 MMT, compared to +200,000 MT previously.
In India, Food Secretary Chopra announced on December 19 that the country might permit sugar exports if there is a surplus after addressing ethanol blending needs. Currently, India estimates a sugar surplus of around 1 MMT this season.
The outlook for increased sugar production in Thailand contributes to bearish market sentiment. Thailand’s Office of the Cane and Sugar Board projected an 18% year-on-year increase in sugar production for 2024/25 to 10.35 MMT, up from 8.77 MMT in the previous season. As the world’s third-largest sugar producer, Thailand plays a significant role in the global sugar market.
A notable short position by funds in London sugar could lead to a short-covering rally. The latest Commitment of Traders (COT) report indicated that funds increased their net-short position in London sugar by 2,322 contracts during the week ending January 7, reaching a five-year high of 2,515 net short positions.
The Indian Sugar and Bio-energy Manufacturers Association (ISM) provided some support for sugar prices by citing a 15.5% year-on-year decrease in India’s sugar production for 2024/25, totaling 9.54 MMT. This reduction could lead the government to maintain export restrictions, limiting global sugar availability.
Brazil faced significant challenges last year due to drought and excessive heat, which led to fires damaging crops in Sao Paulo, the country’s primary sugar-producing state. The sugar cane industry group, Orplana, reported that approximately 2,000 fire outbreaks affected around 80,000 hectares of sugarcane. Green Pool Commodity Specialists estimated that as much as 5 MMT of sugar cane might have been lost. Subsequently, Brazil’s government crop forecasting agency, Conab, lowered its 2024/25 sugar production estimate from 46 MMT to 44 MMT due to these adverse conditions.
Furthermore, Unica reported a 5.1% year-on-year decline in cumulative sugar output in Brazil’s Center-South region for the 2024/25 season, bringing it down to 39.711 MMT, with fewer sugar mills operational compared to the previous year.
On a more positive note, India’s Food Ministry lifted restrictions on sugar mills producing ethanol for the 2024/25 season starting in November, which could extend sugar export curbs. Sugar exports in India have been restricted since October 2023 to ensure adequate domestic supply. In the previous season, India exported only 6.1 MMT of sugar after a record 11.1 MMT the season before, indicating a cautious approach to handling sugar reserves.
Meanwhile, the ISM projected a -2% year-on-year decline in India’s sugar production for 2024/25, forecasting a total of 33.3 MMT, along with a decrease in sugar reserves to 8.4 MMT by September 30 compared to earlier estimates of 9.1 MMT.
Supporting sugar prices, the ISO on August 30 predicted that global sugar production in 2024/25 will reach 179.3 MMT, reflecting a -1.1% year-on-year decrease from 181.3 MMT in 2023/24.
Meanwhile, the USDA’s biannual report released on November 21 forecasted a +1.5% year-on-year increase in global sugar production for 2024/25, estimating a record production of 186.619 MMT, with human sugar consumption also expected to rise by +1.2% to reach 179.63 MMT. The USDA also anticipates a -6.1% decrease in global sugar ending stocks to 45.427 MMT.
On the date of publication, Rich Asplund did not hold any positions, directly or indirectly, in the securities mentioned in this article. All information and data in this article are for informational purposes only. For more information, please view the Barchart Disclosure Policy here.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
