Sugar Prices Drop Amid Record Deliveries and Production Projections

On Monday, May NY world sugar #11 (SBK25) closed down -0.30 (-1.62%), while May London ICE white sugar #5 (SWK25) fell -7.80 (-1.46%). Persistent concerns about demand have pushed sugar prices to their lowest levels in two and a half weeks.

The recent downturn in sugar prices is largely attributed to a record delivery of 1.7 million metric tons of raw sugar by traders Wilmar International Ltd and Sucres et Denrees SA against the March NY futures contract, which expired last Friday. Such large deliveries often signal bearish trends, indicating sellers are struggling to find other markets for their product.

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Last Wednesday, the market began its decline after Czarnikow, a sugar trader, announced that Brazil’s sugar production for the 2025/26 season is expected to reach a record 43.6 million metric tons. This shift arises from the greater profitability of sugar production compared to ethanol.

In a related move, the International Sugar Organization (ISO) raised its forecast for the 2024/25 global sugar deficit to -4.88 million metric tons, up from a prior forecast of -2.51 million metric tons. This marked a notable tightening from the global sugar surplus of 1.31 million metric tons recorded in the 2023/24 season. Additionally, the ISO revised its 2024/25 global sugar production forecast down to 175.5 million metric tons from a previous estimate of 179.1 million metric tons. Conversely, Green Pool Commodity Specialists projected a shift to a surplus of +2.7 million metric tons in 2025/26, compared to an earlier deficit estimate of -3.7 million metric tons for 2024/25.

The previous Tuesday, sugar prices had risen to a 2-3/4 month high, continuing a strong rally that began in mid-January. This rally was fueled by a strengthening Brazilian real (^USDBRL) against the dollar from mid-December to mid-February, discouraging Brazilian export selling and prompting significant fund short-covering in sugar futures.

This week, a supportive factor for sugar prices emerged from India’s sugar production figures, which slid 14% year-on-year to 21.98 million metric tons during the marketing year-to-date from October 1 to February 28, according to the India Sugar and Bio-Energy Manufacturers Association.

From a bearish perspective, however, the Indian government has announced plans to permit the export of 1 million metric tons of sugar this season, easing previous restrictions placed on exports in 2023. The government had restricted sugar exports since October 2023 to maintain domestic supplies, allowing mills to export 6.1 million metric tons during the 2022/23 season, down from a record 11.1 million metric tons the prior year. Nonetheless, the India Sugar Mills Association (ISMA) still anticipates a 15% year-on-year decline in India’s 2024/25 sugar production, forecasting a five-year low of 27.27 million metric tons.

Meanwhile, rising sugar production forecasts in Thailand present additional bearish pressures. Thailand’s Office of the Cane and Sugar Board expects sugar output for the 2024/25 season to increase by 18% year-on-year, reaching 10.35 million metric tons, up from 8.77 million metric tons produced in the 2023/24 season. As the world’s third-largest sugar producer and the second-largest exporter, Thailand’s gains could further impact global prices.

The previous year’s drought and extreme heat led to fires in Brazil, damaging crops in the state of Sao Paulo. Estimates from Green Pool Commodity Specialists suggest up to 5 million metric tons of sugar cane may have been lost due to these fires. Consequently, Brazil’s government crop forecasting agency, Conab, lowered its 2024/25 sugar production estimate from 46 million metric tons to 44 million metric tons, attributing the cut to decreased sugarcane yields linked to these adverse conditions. According to Unica, cumulative sugar output in Brazil’s Center-South region through mid-February has decreased by 5.6% year-on-year, totaling 39.812 million metric tons.

The USDA’s bi-annual report, released November 21, projected a 1.5% increase in global sugar production for 2024/25, reaching a record 186.619 million metric tons, while human sugar consumption is expected to grow by 1.2% year-on-year to a record 179.63 million metric tons. The USDA also forecast a decline in global sugar ending stocks by 6.1% year-on-year to 45.427 million metric tons.

On the date of publication,

Rich Asplund

did not hold positions in any securities mentioned in this article. All information and data in this article are for informational purposes only. For further details, please view the Barchart Disclosure Policy.

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