Sugar Prices Soar Amid Concerns Over Brazil’s Crop
Rising prices driven by weather issues and shifting export dynamics
March NY world sugar #11 (SBH25) increased by +0.26 (+1.29%), while May London ICE white sugar #5 (SWK25) rose by +7.20 (+1.36%) today.
The rally in sugar prices has reached a new two-month high, largely due to worries regarding Brazil’s sugar crop. Alvean, the largest sugar trader globally, reported on Thursday that reduced rainfall has affected sugarcane growth in some regions of Brazil. Should the lack of rainfall continue, the sugar harvest set to begin in April could face delays, resulting in lower sugar production.
Adding to the upward pressure on prices, the Brazilian real (^USDBRL) has strengthened, hitting a three-month high against the US dollar. This surge has led sugar producers in Brazil to minimize export activities.
In contrast, the Indian government announced on January 20 that it would permit its sugar mills to export 1 million metric tons (MMT) of sugar this season, lifting some restrictions on sugar exports that were in place throughout 2023. Since October 2023, India has limited sugar exports to ensure sufficient domestic supply. During the previous 2022/23 season, India allowed the export of only 6.1 MMT of sugar, down from a record 11.1 MMT the year before. Nevertheless, the India Sugar Mills Association (ISMA) predicts that sugar production for 2024/25 will drop by 15% year-over-year to a five-year low of 27.27 MMT. Furthermore, Centrum reported a decline of 12.2% year-over-year in India’s sugar production for the period from October 1 to January 31, totaling 16.5 MMT.
Meanwhile, the outlook for Thailand’s sugar production presents a bearish signal for prices. Thailand’s Office of the Cane and Sugar Board projects a significant production increase of 18% year-over-year for the 2024/25 season, reaching 10.35 MMT, up from 8.77 MMT in the 2023/24 season. Thailand ranks as the world’s third-largest sugar producer and the second-largest exporter.
Additionally, Brazil has faced challenges from drought and extreme heat that led to significant crop damage last year. According to the sugarcane industry group Orplana, approximately 2,000 fire outbreaks affected around 80,000 hectares of sugarcane in São Paulo, Brazil’s top sugar-producing region. Green Pool Commodity Specialists estimated that up to 5 MMT of sugarcane could have been lost due to these fires. The government crop forecasting agency, Conab, reduced its estimate for Brazil’s 2024/25 sugar production from 46 MMT to 44 MMT, attributing this change to lower yields caused by weather conditions. Reportedly, UNICA indicated a decline of 5.5% year-over-year in cumulative sugar output for the 2024/25 season, totaling 39.805 MMT through January.
According to the USDA’s bi-annual report released on November 21, global sugar production for 2024/25 is expected to rise by 1.5% year-over-year to a record 186.619 MMT, with consumption forecasted to increase by 1.2% year-over-year to 179.63 MMT. The USDA also predicts a decrease in global ending stocks by 6.1% year-over-year, resulting in 45.427 MMT.
On the same day, the International Sugar Organization (ISO) forecasted a global sugar deficit of -2.51 MMT for 2024/25, transitioning from a surplus of 1.31 MMT in 2023/24. Green Pool Commodity Specialists projected that the global sugar market could revert to a surplus of +2.7 MMT in the 2025/26 crop year, following a deficit of -3.7 MMT in 2024/25.
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
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