Sugar Prices Rise on Short Covering Despite Oversupply Concerns

July NY world sugar #11 (SBN25) increased by +0.33 (+1.93%), while August London ICE white sugar #5 (SWQ25) rose by +8.90 (+1.83%) today.

Sugar prices are trading higher today as prices rebounded after failing to reach recent significant lows. This uptick sparked some technical short covering in sugar futures.

Production Updates and Market Impact

Last Friday, July NY sugar hit a 3-3/4 year low for nearest futures. Additionally, on Wednesday, London sugar dropped to a 3-1/2 month low due to forecasts of increased sugar production in Brazil. According to the report from Unica last Wednesday, sugar production in Brazil’s Center-South rose by +1.3% year-over-year to 731,000 MT during the first half of April. This report marks the first data release for the 2025/26 season.

On Tuesday, Conab projected that Brazil’s sugar production for the 2025/26 season would increase by +4.0% year-over-year, reaching 45.875 MMT. These indications of larger global sugar output are typically bearish for prices.

Global Production Forecasts

The USDA’s Foreign Agricultural Service (FAS) indicated that India’s sugar production for 2025/26 could rise by +26% year-over-year to 35 MMT, driven by favorable weather and expanded sugar acreage. In its earlier predictions, the USDA noted Brazil’s 2025/26 sugar production would grow by +2.3% year-over-year to 44.7 MMT.

Forecasts for good rainfall in India are dampening sugar prices further. India’s Ministry of Earth Sciences anticipates an above-normal monsoon, estimating total rainfall at 105% of the long-term average. India’s monsoon season occurs from June through September.

Export Projections and Domestic Impact

A bearish element in the market is the Indian government’s decision on January 20 to permit sugar mills to export 1 MMT of sugar this season. This moves to ease restrictions that had been in place since October 2023, intended to maintain adequate domestic supplies. The Indian Sugar Mills Association (ISMA) projects that India’s 2024/25 sugar production may drop by -17.5% year-over-year to a five-year low of 26.4 MMT.

Moreover, the ISMA reported on April 17 that India’s sugar output from October 1 to April 15 was at 25.5 MMT, down -18% compared to the prior year. Indian Food Secretary Chopra also indicated that sugar exports for 2024/25 might reach only 800,000 MT, falling short of earlier expectations of 1 MMT.

International Context: Thailand and Market Surplus

Recent forecasts from Thailand’s Office of the Cane and Sugar Board indicate that the 2024/25 sugar production there has increased by +14% year-over-year to 10.00 MMT. Thailand stands as the third-largest sugar producer and the second-largest exporter globally, further contributing to bearish market sentiments.

Conversely, signs of lower global sugar production appear to support prices. Unica reported a 5.3% year-over-year decline in Brazil’s Center-South sugar output through March 2024 to 40.169 MMT. The Indian Sugar and Bio-energy Manufacturers Association also downgraded its forecast for India’s sugar production to 26.4 MMT, citing lower cane yields.

Market Dynamics and Historical Context

In an update from March, the International Sugar Organization (ISO) raised its global sugar deficit forecast for 2024/25 to -4.88 MMT, compared to an earlier estimate of -2.51 MMT. The ISO also reduced its global sugar production forecast for 2024/25 to 175.5 MMT from a previous estimate of 179.1 MMT.

Last year’s drought and excessive heat caused significant crop damage in Brazil’s top sugar-producing state of São Paulo, with Green Pool Commodity Specialists estimating a loss of up to 5 MMT of sugar cane. Last Thursday, Conab projected a -3.4% year-over-year decline in Brazil’s sugar production for 2024/25, citing lower sugarcane yields.

USDA’s Global Projections

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, reaching a record 186.619 MMT. This report also anticipates a +1.2% year-over-year increase in global human sugar consumption, hitting a record 179.63 MMT.

The USDA further forecasts that global ending stocks for 2024/25 will 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 are solely for informational purposes. For more information, please view the Barchart Disclosure Policy.
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The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.