Sugar Prices Decline Amid Trade Worries and Production Challenges

May NY world sugar #11 (SBK25) is down -0.11 (-0.61%), while May London ICE white sugar #5 (SWK25) has fallen -2.10 (-0.40%).

Market Pressures on Sugar Prices

Sugar prices have dipped, reaching a 2-3/4 month low. Concerns about declining demand for sugar are driving this downward trend. The fears stem from an escalating global trade conflict that is pushing tariffs higher, ultimately leading to increased consumer prices for sugar. On Friday, China announced a tariff hike on all US goods from 84% to 125% in response to the US’s own tariff increases on Chinese products, now set at 145%.

Impacts of Crude Oil Prices

The recent slide in WTI crude oil (CLK25) prices, which sunk to a four-year low last Wednesday, adds additional bearish pressure on sugar prices. Low crude oil prices directly affect ethanol values, potentially leading sugar producers to prioritize sugar over ethanol production—this could boost sugar supplies further.

Production Forecasts Affecting Sugar Markets

Despite the downward pressures, signs of lower global sugar production may lend support to prices. According to Unica, cumulative sugar output in Brazil’s Center-South region decreased by 5.3% year-on-year to 40.169 million metric tons (MMT) through March 2024/25. Additionally, the Indian Sugar and Bio-energy Manufacturers Association revised its 2024/25 production forecast down to 26.4 MMT from a prior estimate of 27.27 MMT, attributing the change to lower cane yields.

On March 6, the International Sugar Organization (ISO) adjusted its global sugar deficit forecast for 2024/25 to -4.88 MMT from -2.51 MMT previously, signaling a tightening market after a 2023/24 global surplus of 1.31 MMT. The ISO also lowered its global sugar production forecast for 2024/25 to 175.5 MMT from 179.1 MMT.

Future Projections and Competition

On the flip side, consultant Datagro projected on March 12 that Brazil’s Center-South sugar production might increase by 6% year-on-year to 42.4 MMT for the 2025/26 season. Furthermore, Green Pool Commodity Specialists announced on February 5 that the global sugar market could shift to a surplus of 2.7 MMT in the 2025/26 crop year, contrasting with an earlier deficit of 3.7 MMT expected for 2024/25.

India’s Export Policies and Production Outlook

Complicating matters, the Indian government stated on January 20 that it would permit sugar mills to export 1 MMT of sugar for the current season to alleviate export restrictions imposed in 2023. In the 2022/23 season ending September 30, India limited sugar exports to only 6.1 MMT, significantly reduced from a record 11.1 MMT in the prior season. The Indian Sugar Mills Association (ISMA) has estimated that India’s sugar production for 2024/25 will decline by 17.5% year-on-year to a five-year low of 26.4 MMT.

Thailand’s Increasing Sugar Production

Thai sugar production, expected to rise, poses additional challenges for prices. On October 29, Thailand’s Office of the Cane and Sugar Board projected an 18% increase in 2024/25 sugar production to 10.35 MMT. Thailand ranks as the world’s third-largest sugar producer and the second-largest exporter.

Impact of Adverse Weather on Brazilian Sugar Production

Weather-related issues have also affected sugar production in Brazil. Drought and high temperatures led to significant crop fires in Sao Paulo, removing as much as 5 MMT of sugar cane, according to Green Pool Commodity Specialists. Additionally, Conab, Brazil’s governmental crop forecasting agency, reduced its 2024/25 production estimates to 44 MMT from a prior forecast of 46 MMT due to anticipated lower yields.

Global Production and Consumption Outlook

The USDA, in its bi-annual report released on November 21, forecasts global sugar production for 2024/25 to rise to a record 186.619 MMT, increasing by 1.5% year-on-year. Global human sugar consumption is projected to rise 1.2% to another record of 179.63 MMT, with forecasted global ending stocks decreasing 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 is solely for informational purposes. For more information, please view the Barchart Disclosure Policy here.

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