Sugar Prices Surge as Dollar Weakens and Production Concerns Rise
On Wednesday, July NY world sugar #11 (SBN25) closed up +0.36 (+2.08%), while August London ICE white sugar #5 (SWQ25) gained +10.60 (+2.18%).
Sugar Prices Rise Amid Dollar Decline
Sugar prices climbed sharply this week due to a decline in the dollar index (DXY00), which fell to a two-week low, leading to fund short covering in sugar futures. Prices further strengthened after Unica reported that poor cane quality in Brazil’s current harvest has pushed sugar millers to use more cane for ethanol, thus reducing sugar output.
Global Sugar Production Outlook
In recent days, market sentiments have shifted toward concerns about a global sugar surplus. Last Tuesday, prices dipped to a one-and-a-half-week low following a report from consultant Datagro, which projected a global sugar surplus of +1.53 million metric tons (MMT) for 2025/26, rebounding sharply from a deficit of -4.67 MMT in 2024/25. Concurrently, StoneX forecasted an even larger surplus of +3.74 MMT for the same period.
Expectations for higher sugar production in India are also influencing market conditions. On May 6, the USDA’s Foreign Agricultural Service estimated a 26% year-over-year increase in India’s sugar output for 2025/26, projecting a total of 35 MMT. Similarly, Brazil’s sugar production is expected to rise: a forecast on April 23 indicated an increase of 2.3% from 43.7 MMT to 44.7 MMT for the same year.
Impact of India’s Monsoon Season
In addition, favorable weather conditions play a critical role. India’s Ministry of Earth Sciences predicts an above-normal monsoon this year, with rainfall expected to reach 105% of the long-term average. This period runs from June through September and could significantly enhance sugar crop yields.
India’s sugar export policies are also shifting. On January 20, the Indian government permitted sugar mills to export 1 MMT this season, easing the export restrictions imposed earlier. However, the Indian Sugar Mills Association (ISMA) projects a 17.5% year-over-year decline in sugar production for 2024/25, potentially dropping to a five-year low of 26.2 MMT. Reports indicate that sugar production from October 1 to May 15 this year reached 25.74 MMT, which is a 17% decrease compared to the previous year.
Thailand’s Sugar Production Forecast
In a further bearish indicator for sugar prices, Thailand is also expected to increase its sugar output. The Office of the Cane and Sugar Board reported a 14% year-over-year rise in production for 2024/25, totaling 10.00 MMT. As the world’s third-largest sugar producer and second-largest exporter, this increase adds pressure to global sugar prices.
Reports of Lower Production Support Prices
Recent reports have also indicated falling sugar production in key regions, which could lend support to prices. Unica noted a 38.6% year-over-year decline in Brazil’s Center-South sugar production for April to just 1.58 MMT. Furthermore, projections have shown a cumulative 5.3% year-over-year drop in Brazil’s Center-South sugar output for the 2024/25 season through March.
The International Sugar Organization (ISO) recently raised its forecast for the global sugar deficit to a nine-year high of -5.47 MMT for 2024/25, revising earlier estimates. It also lowered its global sugar production forecast to 174.8 MMT.
Drought and heat last year led to significant crop damage in Brazil’s major sugar-producing state of Sao Paulo. Green Pool Commodity Specialists reported losses of up to 5 MMT due to fires caused by these conditions. Conab also projected a 3.4% year-over-year decrease in Brazil’s sugar production for 2024/25, attributing it to lower sugarcane yields resulting from the unfavorable weather.
The USDA’s bi-annual report, released November 21, projected that global sugar production would increase 1.5% year-over-year to a record 186.619 MMT, with global sugar consumption expected to rise 1.2% year-over-year to a record 179.63 MMT. Global ending stocks for 2024/25 are forecasted to decrease by 6.1% year-over-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 is solely for informational purposes. For more information please view the Barchart Disclosure Policy.
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