On Tuesday, May NY world sugar #11 (SBK25) closed down -0.37 (-1.98%), while May London ICE white sugar #5 (SWK25) dropped -10.70 (-2.00%). These declines brought sugar prices to their lowest level in five weeks, primarily influenced by the weakened Brazilian real (^USDBRL). The real fell to a 2-1/2 month low against the dollar, prompting increased export selling from Brazilian sugar producers.

Concerns over a potential global trade war are also negatively impacting sugar prices. Traders fear that heightened trade tensions will lead to a decline in consumer demand for sugar, compounded by tariffs driving prices higher. Additionally, a significant drop in WTI crude oil (CLK25) to a four-year low exacerbates the situation. Lower crude oil prices reduce ethanol prices, possibly leading sugar mills to shift cane crushing operations from ethanol production to sugar, thereby increasing overall sugar supplies.

Global Sugar Production Trends

Despite the bearish sentiment in the market, signs of declining global sugar production could provide some support to prices. The Indian Sugar and Bio-energy Manufacturers Association recently downgraded its 2024/25 sugar production forecast for India to 26.4 MMT, down from a previous estimate of 27.27 MMT, due to lower cane yields. Furthermore, last Thursday, Unica reported that Brazil’s Central-South sugar output fell by 5.3% year-on-year to 39.983 MMT as of mid-March. Sugar trader Czarnikow has also revised its Brazil 2025/26 sugar production estimate down to 42 MMT from 43.6 MMT.

Global Sugar Deficit Forecasts

The International Sugar Organization (ISO) has raised its forecast for the global sugar deficit in 2024/25 to -4.88 MMT from a November estimate of -2.51 MMT. This reflects a tighter market compared to the 2023/24 surplus of 1.31 MMT. The ISO also adjusted its 2024/25 global sugar production forecast down to 175.5 MMT, revising it from 179.1 MMT.

Bearish Factors Impacting the Market

On the flip side, consultant Datagro anticipates a 6% year-on-year increase in Brazil’s Central-South sugar production for 2025/26, projecting it to reach 42.4 MMT. Similarly, Green Pool Commodity Specialists believe the global sugar market system may shift to a surplus of 2.7 MMT in the 2025/26 crop year, transitioning from a deficit of 3.7 MMT in 2024/25.

Furthermore, the Indian government has recently announced it will permit mills to export 1 MMT of sugar in the current season, easing previous restrictions. In contrast, India had limited sugar exports since October 2023 to ensure stable domestic supplies, with only 6.1 MMT allowed during the 2022/23 season—down from a record 11.1 MMT the year prior. The Indian Sugar Mills Association (ISMA) predicts a drastic 17.5% decline in India’s 2024/25 sugar production to a five-year low of 26.4 MMT.

Regional Production Prospects

In the meantime, reports from Thailand suggest an increase in sugar production, which might also be a bearish indicator. Thailand’s Office of the Cane and Sugar Board projects the country’s sugar production to rise by 18% year-on-year for 2024/25, reaching 10.35 MMT, up from 8.77 MMT in the previous season. As the world’s third-largest producer and second-largest exporter of sugar, Thailand’s output changes significantly influence global supply trends.

Brazil, the leading producer, faced challenges from last year’s drought and excessive heat, resulting in significant crop damage from wildfires, particularly in Sao Paulo. Estimates indicate that as much as 5 MMT of sugar cane may have been lost due to these events. Conab, Brazil’s government crop forecasting agency, has revised its sugar production estimates down from 46 MMT to 44 MMT for 2024/25, attributing this reduction to lower yields.

According to the USDA’s November 21 report, however, global sugar production for 2024/25 is expected to increase by 1.5% year-on-year, reaching a record 186.619 MMT. Additionally, global human sugar consumption is projected to rise by 1.2% year-on-year to 179.63 MMT, while 2024/25 global sugar ending stocks are anticipated to 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.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.