Sugar Prices Climb on Brazil’s Production Slump

Market Reacts to Falling Output and Changing Global Dynamics

March NY world sugar #11 (SBH25) closed up +0.12 (+0.56%) on Wednesday, while March London ICE white sugar #5 (SWH25) increased by +5.00 (+0.90%).

Moderate gains in sugar prices were seen on Wednesday, largely due to a decline in Brazil’s Center-South sugar production. Unica reported that the region’s sugar output for the first half of November dropped by -59.2% year-over-year to 898 metric tons (MT). The cumulative sugar production for the 2024/25 season through mid-November has also decreased by -3.0% year-on-year to 38.274 million metric tons (MMT).

Last Tuesday, sugar prices surged to two-week highs following predictions from Wilmar International that the number of closed sugar mills in Brazil—currently at 38—could more than triple this month, significantly impacting the country’s overall sugar production. Typically, these mills halt sugar cane processing during Brazil’s wet months of December and January and may resume in March, depending on weather conditions. However, heavy rains this month have caused mills to close earlier than expected.

This year’s earlier drought and excessive heat caused numerous fires in Brazil, damaging crops in the country’s main sugar-producing region, São Paulo. According to the sugar cane industry group Orplana, approximately 2,000 fire outbreaks affected around 80,000 hectares of sugarcane. Green Pool Commodity Specialists estimate that up to 5 MMT of sugar cane may have been lost due to these fires. In reaction to the situation, Conab, Brazil’s crop forecasting agency, revised its overall sugar production estimate for 2024/25 down to 42 MMT from 42.7 MMT due to lower yields from drought and heat. Rabobank also lowered its forecast on September 20 from 40.3 MMT to 39.3 MMT based on dry conditions. Similarly, Datagro cut its 2024/25 estimate to 38.7 MMT from 39.3 MMT earlier this month, citing drought and limited mill capacity.

Earlier this week, sugar prices dipped to one-week lows due to an improvement in global sugar supplies. The International Sugar Organization (ISO) recently reduced its 2024/25 global sugar deficit forecast to -2.51 MMT, up from -3.58 MMT in August. The ISO also increased its estimate for the 2023/24 global sugar surplus to 1.31 MMT from a previous +200,000 MT projection.

Meanwhile, news from Thailand suggests a bearish outlook for sugar prices. On October 29, Thailand’s Office of the Cane and Sugar Board projected a +18% year-on-year increase in sugar production for 2024/25 to 10.35 MMT. Thailand, ranked as the world’s third-largest sugar producer and the second-largest exporter, produced 8.77 MMT during the 2023/24 season ending in April.

India’s sugar production remains a supportive factor for prices. On August 30, the country’s Food Ministry lifted restrictions on sugar mills producing ethanol for the 2024/25 year, which may extend India’s sugar export curbs initiated last December to stabilize domestic reserves. Since October 2023, India limited sugar exports to maintain adequate local supply, permitting only 6.1 MMT during the 2022/23 season. However, the Indian Sugar and Bio-energy Manufacturers Association (ISM) indicated on October 3 that India should have 2 MMT of sugar available for export next season and called for lifting the current restrictions.

The ISM reported a -1.6% year-on-year decrease in India’s 2023/24 sugar production to 31.4 MMT as of May 13, and on September 26, projected a further fall of -2% year-on-year to 33.3 MMT for 2024/25. This year, India’s sugar reserves were estimated at 8.4 MMT by September 30, down from a prior estimate of 9.1 MMT.

Additionally, the ISO projected global sugar production for 2024/25 at 179.3 MMT, reflecting a -1.1% year-on-year decline from 181.3 MMT in 2023/24. The USDA, however, expects global sugar production to rise by +1.5% year-on-year to a record 186.619 MMT for 2024/25, while predicting a +1.2% increase in global human sugar consumption to a record 179.63 MMT. The USDA foresees global sugar ending stocks decreasing by -6.1% year-on-year 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.

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