Sugar Prices Rise on Production Concerns in India and Brazil
New York’s March world sugar #11 futures (SBH25) closed up +0.47 (+2.44%) on Thursday, while March London ICE white sugar #5 (SWH25) settled up +6.00 (+1.18%).
Market Boost from Indian Sugar Production Reports
On Thursday, sugar prices saw moderate increases. New York sugar reached a two-week high, and London sugar achieved a one-week peak. The uptick is largely attributed to signs of reduced sugar production in India, the world’s second-largest sugar producer. The Indian Sugar and Bio-energy Manufacturers Association (ISM) reported that India’s sugar output from October 1 to December 31 for the 2024/25 season is projected to drop by 15.5% year-over-year to 9.54 million metric tons (MMT). This decline could lead the Indian government to maintain export restrictions, further tightening global sugar supplies.
Crude Oil Prices Impacting Sugar Market
The rise in West Texas Intermediate (WTI) crude oil prices, which hit a two-and-a-half-month high on Thursday, also supports sugar prices. An increase in crude oil generally benefits ethanol prices, potentially leading sugar mills to divert more cane towards ethanol production, thereby decreasing available sugar supply.
Recent Trends in Sugar Prices
Earlier this week, New York sugar futures fell to a three-and-a-half-month low, while London sugar hit a two-and-three-quarter-year low. For the past three months, sugar prices have been on a downward trend due to an improved global supply outlook. On November 21, the International Sugar Organization (ISO) adjusted its forecast for the 2024/25 global sugar deficit to -2.51 MMT, improving from August’s estimate of -3.58 MMT. Additionally, ISO raised its estimate for the 2023/24 global sugar surplus to 1.31 MMT, up from an earlier projection of +200,000 metric tons.
Increased Sugar Production in Thailand
Concerns over sugar prices persist as Thailand anticipates increased production. The Office of the Cane and Sugar Board in Thailand estimates that the country’s sugar production for the 2024/25 season could rise by 18% year-over-year to 10.35 MMT, following the 8.77 MMT produced in the previous season. As the third-largest sugar producer in the world, Thailand plays a significant role in the global market.
Potential for Indian Sugar Exports
On December 19, India’s Food Secretary, Chopra, mentioned the possibility of allowing sugar exports if a surplus exists after meeting the domestic ethanol blending requirements. The Indian government currently estimates a sugar surplus of about 1 MMT for this season.
Currency Effects on Brazilian Sugar Producers
Brazil’s sugar industry is facing pressure from a weakened Brazilian real against the dollar, encouraging export sales by Brazilian sugar producers. The currency is currently hovering just above its record low against the dollar, marked on December 18.
Environmental Factors Impacting Brazilian Sugar Crops
This year’s drought and high temperatures have caused significant damage to sugar crops in Brazil’s leading region—Sao Paulo. The sugar cane industry group, Orplana, reported that fires affected around 80,000 hectares of sugarcane plantations. Green Pool Commodity Specialists estimated a loss of up to 5 MMT of sugar cane due to these incidents. Brazil’s government crop forecasting agency, Conab, revised its 2024/25 sugar production estimate downward to 44 MMT, which was previously set at 46 MMT, citing lower yields from drought-stricken crops. According to Unica, cumulative sugar output for the Center-South region through mid-December is down 5.1% year-over-year to 39.711 MMT, with only 129 sugar mills operating versus 185 mills during the same period last year.
India’s Sugar Export Policies
In a move expected to influence sugar prices, India’s Food Ministry lifted restrictions on sugar mills producing ethanol for the 2024/25 year starting in November. These measures may extend India’s limitations on sugar exports, which have been in place to maintain adequate domestic supplies. In the 2022/23 season, India permitted only 6.1 MMT of sugar exports, a significant drop from the 11.1 MMT allowed in the previous season. However, the ISM announced on October 3 that India could have 2 MMT available for export next season, urging the government to reconsider current restrictions.
Production Estimates and Trends
The ISM projected a 2% year-over-year decline in India’s 2024/25 sugar production to 33.3 MMT, with expected sugar reserves at 8.4 MMT as of September 30. Separately, the National Federation of India Cooperative Sugar Factories Ltd reported a decline of 18% year-over-year in India’s sugar production from October 1 to December 15, totaling 6.1 MMT.
Global Sugar Production Forecasts
In support of sugar prices, the ISO projected on August 30 that global sugar production for the 2024/25 season would fall by 1.1% year-over-year to 179.3 MMT, down from 181.3 MMT in 2023/24. Meanwhile, the USDA’s biannual report released on November 21 forecasted a 1.5% year-over-year increase in global sugar production for 2024/25, reaching a record 186.619 MMT. It also estimated a 1.2% year-over-year rise in global sugar consumption, projecting it will hit a record 179.63 MMT. The USDA further anticipated a decline of 6.1% year-over-year in global sugar ending stocks, estimating them at 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.
