Global Sugar Market: Prices Soar While Production Outlooks Shift
March NY world sugar #11 (SBH25) closed at +0.37 (+2.08%) on Wednesday, while March London ICE white sugar #5 (SWH25) closed at +11.20 (+2.40%).
Price Surge Driven by Brazilian Real and Short-Covering
Sugar prices witnessed a significant increase on Wednesday, thanks to the Brazilian real (^USDBRL) rising to a six-week high. This development triggered short-covering in sugar futures, as a stronger real makes exports from Brazil less attractive for sellers.
Commodity Funds’ Short Positions Reach New Highs
Recent data indicates that commodity funds hold excessive short positions in sugar futures, which may fuel any potential rally. According to last Friday’s Commitment of Traders (COT) report, these funds ramped up their net-short NY sugar positions by 47,005, reaching a five-year high of 106,045 net short positions. The London market saw similar actions, with net-short positions increasing by 9,627, totaling 121,425 net shorts—also a five-year high.
Market Pressures: Extended Sell-Off and Supply Outlook
On Tuesday, sugar market prices continued a sell-off that has lasted for three and a half months, with NY sugar hitting a five-month low and London sugar reaching a three-and-a-third-year low. An improving global sugar supply forecast is adding downward pressure on prices. In a notable development, India announced it would permit sugar mills to export 1 million metric tons (MMT) this season, easing restrictions that have been in place since October 2023. Previously, India limited its exports to only 6.1 MMT during 2022/23 compared to a record 11.1 MMT the year before.
International Sugar Organization Lowers Global Deficit Forecast
The International Sugar Organization (ISO) updated its forecasts on November 21, reducing the anticipated global sugar deficit for 2024/25 to -2.51 MMT from a previously projected -3.58 MMT in August. Additionally, the ISO increased its surplus estimate for 2023/24 from 200,000 MT to 1.31 MMT.
Thailand’s Production Set to Rise, Influencing Sugar Prices
Thailand’s sugar production outlook is becoming a bearish factor for sugar prices. The Office of the Cane and Sugar Board in Thailand expects sugar production in the 2024/25 season to surge by 18% year-on-year to 10.35 MMT, compared to 8.77 MMT in the previous season. As the world’s third-largest sugar producer, this increase could significantly shift market dynamics.
India Faces Declining Sugar Output Amid Global Production Changes
In contrast, India’s sugar production is projected to fall. The Indian Sugar and Bio-energy Manufacturers Association (ISM) reported a 15.5% year-on-year decline in sugar production from October 1 to December 31, totaling 9.54 MMT. Projections suggest India’s production could decrease to a five-year low of 27.6 MMT for 2024/25.
Challenges in Brazil: Fires and Production Cuts
Brazil’s sugar sector faced challenges last year due to drought and heat, which resulted in fires damaging crops, particularly in São Paulo. Reports indicate that about 2,000 fire outbreaks affected up to 80,000 hectares of sugarcane. Green Pool Commodity Specialists estimate losses of 5 MMT of sugarcane due to these incidents. Consequently, the government’s crop forecasting agency, Conab, decreased its 2024/25 Brazil sugar production forecast to 44 MMT, down from 46 MMT, citing reduced yields.
Future Projections and USDA Report Insights
Adding further context, the ISO forecasted global sugar production for 2024/25 at 179.3 MMT, a decrease of 1.1% from 2023/24 figures. Meanwhile, the USDA’s bi-annual report, released on November 21, predicted a record rise for global sugar production in 2024/25, estimating it will reach 186.619 MMT, while human sugar consumption is expected to grow by 1.2% to a record 179.63 MMT. The USDA also anticipated a 6.1% year-on-year decrease in global sugar ending stocks, bringing them down 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.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
