Sugar Prices Decline Amid Forecasted Production Increases
March NY world sugar #11 (SBH25) closed down -0.17 (-0.81%) on Friday, while March London ICE white sugar #5 (SWH25) fell -5.00 (-0.94%).
Recent Performance and Factors Influencing Prices
On Friday, sugar prices continued to decline, adding to Thursday’s losses. NY sugar reached a 2-3/4 month low, and London sugar hit a 1-month low. Brazil’s increased sugarcane processing has weighed heavily on sugar prices. According to a report from Unica, Brazil crushed 20.35 million metric tons (MMT) of sugarcane in the second half of November, surpassing expectations of 15.5 MMT.
Global Supply Outlook Impact
An improved outlook for global sugar supply is exerting downward pressure on prices. On November 21, the International Sugar Organization (ISO) adjusted its 2024/25 global sugar deficit forecast to -2.51 MMT, a notable change from its earlier estimate of -3.58 MMT provided in August. Furthermore, the ISO raised its 2023/24 global sugar surplus estimate to 1.31 MMT, up from +200,000 MT previously.
Increased Production in Thailand
Looking ahead, an anticipated rise in sugar production in Thailand is also bearish for sugar prices. Thailand’s Office of the Cane and Sugar Board predicts that sugar production will increase by 18% year-on-year (y/y) to 10.35 MMT for the 2024/25 season. In comparison, the country produced 8.77 MMT of sugar in the 2023/24 season ending in April. Thailand is a major player in the global sugar market, ranking as the third-largest sugar producer and second-largest exporter.
B Brazilian Production Challenges
Although Brazil’s Center-South sugar output has recently declined, offering some price support, Unica noted a cumulative decrease of 3.7% y/y to 39.361 MMT through November for the 2024/25 season. Drought and excessive heat earlier this year led to fires in Brazil, particularly affecting the key production state of Sao Paulo. According to the industry group Orplana, about 2,000 fire outbreaks have impacted up to 80,000 hectares of sugarcane. Green Pool Commodity Specialists speculate that approximately 5 MMT of sugar cane might have been lost due to these fires. As a result, Brazil’s government crop forecasting agency, Conab, revised its 2024/25 sugar production estimate down to 44 MMT from an earlier projection of 46 MMT because of reduced sugarcane yields.
India’s Role in the Sugar Market
On a more positive note for prices, India’s Food Ministry lifted restrictions on sugar mills producing ethanol for the upcoming 2024/25 year starting in November. This move may extend India’s sugar export limitations. Previously, India ordered sugar mills to halt sugarcane use for ethanol production during the 2023/24 season to bolster domestic sugar reserves. Since October 2023, India has restricted sugar exports, allowing only 6.1 MMT to leave the country in the 2022/23 season, a drop from a record 11.1 MMT the season before. However, the Indian Sugar and Bio-energy Manufacturers Association (ISM) indicated that India will have 2 MMT for export next season and has urged the government to reconsider current export restrictions.
Production Trends and Forecasts
As part of the broader outlook, the ISM reported that India’s sugar production from October to April for the 2023/24 season decreased by 1.6% y/y to 31.4 MMT. Furthermore, the ISM projected a 2% y/y decline in production for the 2024/25 season, estimating production at 33.3 MMT. As of September 30, India’s sugar reserves were forecasted to be 8.4 MMT, compared to the prior estimate of 9.1 MMT made in May.
Additionally, the ISO’s forecast from August 30 projected a global sugar production of 179.3 MMT for 2024/25, reflecting a 1.1% decline from the 181.3 MMT expected for 2023/24. Conversely, the USDA’s bi-annual report published on November 21 projected global sugar production for 2024/25 to increase by 1.5% y/y to a record 186.619 MMT and forecasted global human sugar consumption to rise by 1.2% y/y to reach a record 179.63 MMT. The USDA also anticipated that global sugar ending stocks for 2024/25 would drop by 6.1% y/y 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.
