Sugar Prices Rise Amid Dollar Weakness and Supply Concerns

On Friday, May NY world sugar #11 (SBK25) increased by +0.18, or +0.99%, while May London ICE white sugar #5 (SWK25) rose by +8.00, marking an increase of +1.55%. This upward movement in sugar prices occurred as the dollar index (DXY00) fell to a four-month low, prompting short covering in sugar futures.

Market Dynamics and Recent Trends

Earlier in the week, sugar prices had dropped to six-week lows due to concerns about demand in light of plentiful supplies. A significant factor contributing to this decline was the delivery of 1.7 million metric tons (MMT) of raw sugar against the March NY futures contract by major market players Wilmar International Ltd and Sucres et Denrees SA, a record volume that typically signals a bearish outlook as it indicates sellers have limited alternative markets.

Further compounding the downward pressure, sugar trader Czarnikow forecasted that Brazil’s sugar production for the 2025/26 season could reach a record 43.6 MMT, driven by the higher profitability of sugar compared to ethanol production. This prediction poses additional challenges to sugar prices, which had already begun to weaken.

Global Production and Future Forecasts

In a contrasting outlook, the International Sugar Organization (ISO) recently increased its global sugar deficit forecast for 2024/25 to -4.88 MMT, up from -2.51 MMT previously predicted in November. This reflects a market shift from a surplus of 1.31 MMT in the current 2023/24 cycle. Additionally, the ISO revised its global sugar production estimate for 2024/25 downward to 175.5 MMT from 179.1 MMT. In an alternate perspective, Green Pool Commodity Specialists projected that the global market will shift to a surplus of +2.7 MMT in the 2025/26 crop year, following a deficit of -3.7 MMT in 2024/25.

Support for sugar prices comes from reports indicating a 14% year-over-year decline in India’s sugar production, which fell to 21.98 MMT from October 1 through February 28, according to the India Sugar and Bio-Energy Manufacturers Association.

Indian Exports and Agricultural Challenges

Despite this production drop, the Indian government announced on January 20 that it would permit its sugar mills to export 1 MMT this season, easing restrictions previously imposed in 2023. Since October 2023, India had limited sugar exports to maintain sufficient domestic supplies, allowing only 6.1 MMT during the 2022/23 season—a significant decrease from 11.1 MMT in the prior season. However, the India Sugar Mills Association (ISMA) anticipates a further decrease in India’s 2024/25 production, forecasting a 15% year-over-year decline to 27.27 MMT, which is projected to be a five-year low.

A bearish development for sugar prices arises from anticipated higher sugar production in Thailand. According to Thailand’s Office of the Cane and Sugar Board, production for 2024/25 is expected to increase by +18% year-over-year to 10.35 MMT, up from 8.77 MMT in 2023/24. Thailand is recognized as the world’s third-largest sugar producer and the second-largest exporter.

Impact of Natural Disasters in Brazil

Brazil’s sugar crop has also faced setbacks, with drought and excessive heat inflicting damage due to fires in São Paulo, the country’s leading sugar-producing region. Green Pool Commodity Specialists noted the potential loss of as much as 5 MMT of sugarcane from these fires. The government agency Conab revised its 2024/25 production estimate for Brazil down to 44 MMT from a previous forecast of 46 MMT, attributing this to lower sugarcane yields. On Wednesday, Unica reported that cumulative sugar output for the 2024/25 season through mid-February had declined by -5.6% year-over-year to 39.812 MMT.

In its bi-annual report issued on November 21, the USDA projected a +1.5% year-over-year increase in global sugar production for 2024/25, reaching a record 186.619 MMT. Global human sugar consumption is expected to rise by +1.2% to a record 179.63 MMT, while the USDA also forecasts global ending stocks for 2024/25 to decrease by -6.1% 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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