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The Bittersweet World of Sugar Prices: A Rollercoaster Ride of Supply and Demand

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Sugar Prices Open on High Note Only to Tumble Due to Increased Sugar Production in India

As the sun rises on the trading day, sugar enthusiasts were met with a bitter surprise. Sugar prices slipped after an initial surge, hinting at a looming challenge – increased sugar production in India. The Indian Sugar and Bio-energy Manufacturers Association sounded the alarm by revealing that sugar production for 2023/24 from October to March clocked a +0.4% rise to 30.2 MMT, painting the picture of an industry gearing up for battle. The number of Indian sugar mills that shut down operations by the end of March stood at 322, a slight drop from the prior year’s 346 closures.

Crude Price Surge Pushes Sugar Prices to 1-Month Highs

Like a shot of adrenaline, sugar prices rode the wave of crude price strength to hit 1-month highs early in the trading session. The rally in crude prices, ascending to a 5-1/4 month peak, cast a favorable shadow on ethanol prices, potentially steering global sugar mills towards ethanol production, thereby tightening the reins on sugar supply.

Brazil’s Sugar Output Surge Casts a Shadow on the Horizon

However, not all that glitters is gold for sugar aficionados. Last week’s report from Unica pointed to a jaw-dropping +313% surge in Brazil’s Center-South sugar output in the first half of March compared to the previous year, sending ripples of concern through the market. Brazilian sugar output in the 2023-24 marketing year through mid-March also displayed an impressive +25.8% growth, propelled by an uptick in cane crushing for sugar over ethanol production. A bitter pill to swallow for those eyeing a sugar rush.

Global Sugar Landscape: India and Thailand Paint Contrasting Pictures

Two giants in the sugar realm – India and Thailand – present a fascinating contrast. While India’s reduced sugar production stands as a beacon of hope for prices amidst a lackluster monsoon season, Thailand’s sugar forecast looks grim. The Thai Sugar Millers Corp’s projection of a -32% y/y plummet in sugar production to a 17-year low due to severe drought paints a picture of struggle as rainfall remains scarce. Could Thailand’s woes sweeten the pot for sugar prices globally?

The Sweet and Sour Symphony of Global Sugar Production Expectations

The USDA’s bi-annual report adds an interesting layer to the sugar saga. Projections point to a +4.7% y/y surge in global 2023/24 sugar production, reaching a record high of 183.461 MMT. Yet, amidst this surge, a slight increase in human sugar consumption to 178.431 MMT is forecasted, muddying the waters for sugar end stocks, expected to dwindle to a 13-year low.

It’s a dance of supply and demand, with the International Sugar Organization joining the fray, lifting the curtain on a global sugar deficit estimate and painting a picture of a market balancing on a knife’s edge. As investors brace for the sugar rollercoaster, the sugar story continues to unfold, promising more twists and turns, sweet victories, and bitter disappointments.

Get ready to buckle up as we ride into the intriguing world of sugar prices!