Sugar Prices Stabilize as Weather Factors Impact Production Forecasts
Modest Gains in Sugar Markets
March NY world sugar #11 (SBH25) closed on Friday at +0.02 (+0.09%), while December London ICE white sugar #5 (SWZ24) rose by +0.90 (+0.16%). On the same day, sugar prices enjoyed slight increases, aided by a weaker dollar (DXY00) that encouraged short covering in sugar futures. The previous Thursday saw NY sugar dip to a four-week low, and London sugar drop to a one-week low, primarily due to rain forecasts in Brazil. Meteorologist Climatempo has predicted substantial rainfall for Brazil’s Center-South, the country’s largest sugar-producing area, over the next week, which is expected to enhance moisture levels and promote better sugarcane yields.
Production Estimates Adjusted
Factors contributing positive support for sugar prices include a recent report from food processor Wilmar International, which revised its 2024/25 Brazil Center-South sugar production estimate downward to 38.2 million metric tons (MMT) to 39.5 MMT from a prior estimate of 38.3 MMT to 40.8 MMT, citing insufficient rainfall and high temperatures. Additionally, UNICA reported a 16.2% year-on-year decline in sugar output for Brazil’s Center-South region during the latter half of September, totaling 2.829 MMT. Yet, year-to-date sugar output through September for 2024/25 was up by 1.5% to 33.154 MMT.
Impact of Drought on Crop Yields
On September 26, NY sugar surged to a seven-and-a-half-month high due to heightened concerns over reduced sugar production in Brazil, influenced by ongoing drought conditions. Notably, Rabobank has lowered its 2024/25 Brazil sugar production forecast to 39.3 MMT from an earlier 40.3 MMT due to severe dryness. Severe drought and high temperatures have also sparked fires in Brazil, damaging crops in São Paulo, the country’s leading sugar-producing state. Orplana, a sugar cane industry group, indicated that about 2,000 fire outbreaks have affected up to 80,000 hectares of sugarcane in São Paulo, with Green Pool Commodity Specialists estimating a loss of around 5 MMT of sugarcane. In light of these difficulties, Conab, Brazil’s government crop forecasting agency, reduced its overall sugar production estimate for 2024/25 on August 22, from 42.7 MMT to 42 MMT, attributing the adjustment to falling sugarcane yields.
India’s Strong Monsoon Challenges Sugar Prices
In contrast, reports of above-average monsoon rains in India are putting downward pressure on sugar prices. The Indian Meteorological Department noted that as of September 30, India recorded 934.8 mm of rain during the current monsoon season, the highest in four years and exceeding the long-term average of 868.6 mm. India’s monsoon season typically runs from June to September.
Policy Changes and Export Curbs
A supportive factor for sugar prices emerged when India’s Food Ministry lifted restrictions on sugar mills producing ethanol for the 2024/25 year, which might extend the country’s sugar export curbs. In December, India had ordered mills to suspend sugarcane use for ethanol production to enhance sugar reserves. Since October 2023, India has been limiting sugar exports to ensure sufficient domestic supply, allowing only 6.1 MMT to be exported during the 2022/23 season, down from a record 11.1 MMT the previous season. Nonetheless, on October 3, the Indian Sugar and Bio-energy Manufacturers Association (ISM) projected that India will have 2 MMT of sugar available for export next season and encouraged the government to remove the existing export restrictions.
Production Trends in India and Thailand
Moreover, the ISM reported that India’s 2023/24 sugar production from October to April fell by 1.6% year-on-year to 31.4 MMT. On September 26, the ISM projected a further decline in sugar production for the 2024/25 season, expecting a 2% decrease to 33.3 MMT, while estimating sugar reserves on September 30 at 8.4 MMT, down from a previous estimate of 9.1 MMT in May. Additionally, a surge in sugar production is anticipated in Thailand, with the Office of the Cane and Sugar Board forecasting an 18% year-on-year increase in production to 10.35 MMT for 2024/25, up from 8.77 MMT in 2023/24. Thailand remains the world’s third-largest sugar producer and second-largest exporter.
Global Sugar Supply and Demand Outlook
The International Sugar Organization (ISO) has projected a global sugar deficit of 3.58 MMT for the 2024/25 season, considerably larger than the estimated 200,000 MT deficit for 2023/24. According to the ISO, global sugar production for 2024/25 is expected to decline by 1.1% year-on-year to 179.3 MMT. However, the USDA anticipates a 1.4% year-on-year increase in global sugar production for 2024/25, reaching a record 186.024 MMT, with human sugar consumption also expected to rise by 0.8% to a new high of 178.788 MMT. The USDA forecasts that ending stocks for global sugar in 2024/25 will fall by 4.7% year-on-year, reaching a 13-year low of 38.339 MMT.
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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.
