Sugar Prices Slip as Brazil and India Forecasts Weigh on Market

May NY world sugar #11 (SBK25) closed down -0.05 (-0.28%) on Wednesday, while August London ICE white sugar #5 (SWQ25) declined -2.50 (-0.49%).

Market Movement Shifted by Production Projections

Sugar prices retreated on Wednesday after initially advancing. The USDA’s Foreign Agricultural Service (FAS) projected a 2.3% year-on-year increase in Brazil’s 2025/26 sugar production, predicting it will rise to 44.7 million metric tons (MMT) from 43.7 MMT in the previous season.

Impact of Crude Oil Prices

A drop in crude oil prices also pressured sugar markets. The price of WTI crude oil (CLM5) fell by 2%, which may induce global sugar mills to shift more cane crushing to sugar production instead of ethanol. This could lead to an increase in sugar supplies.

Currency Fluctuations Affecting Export

Initially, sugar prices benefited from a stronger Brazilian real (^USDBRL), which reached a 2-1/2 week high against the dollar. This discouraged Brazilian sugar producers from selling exports.

Reduced Sugar Output in India

Sugar prices also drew some support from last week’s news about decreased sugar output in India. The Indian Sugar and Bio-Energy Manufacturers Association (ISMA) reported that sugar production from October 1 to April 15 was 25.5 MMT, down 18% from the same timeframe last year.

Bearish Sentiment from Previous Price Declines

Despite some gains, sugar prices found themselves under pressure last week. NY sugar futures hit a 2-1/2 year low, and London sugar recorded a 3-month low. An anticipated bumper sugar crop in India might be negatively impacting prices. The Indian Ministry of Earth Sciences forecasted above-normal monsoon rains this year, estimating total rainfall to be 105% of the long-term average.

Global Trade Concerns

A looming concern regarding the global trade war poses risks to world economic growth. Tariffs could lead to increased sugar prices for consumers, potentially dampening demand.

Brazil and India’s Production Projections

Consultant Datagro projected on March 12 that Brazil’s Center-South sugar production would increase by 6% year-on-year to 42.4 MMT in 2025/26. Conversely, Green Pool Commodity Specialists indicated that the worldwide sugar market is expected to transition from a deficit of -3.7 MMT in the 2024/25 crop year to a surplus of +2.7 MMT in 2025/26.

Indian Export Dynamics

On January 20, the Indian government announced it would permit sugar mills to export 1 MMT of sugar this season. This decision eases restrictions previously imposed to maintain domestic supplies. India limited sugar exports to 6.1 MMT for the 2022/23 season after allowing a record 11.1 MMT the year prior. However, ISMA forecasts a decrease in India’s 2024/25 sugar production to 26.4 MMT, a 5-year low, reflecting a decline of 17.5% year-on-year.

Thailand’s Production Forecast

In Thailand, an increase in sugar production adds bearish pressure on prices. Thailand’s Office of the Cane and Sugar Board reported a 14% year-on-year boost in sugar production for 2024/25, totaling 10.00 MMT. As the world’s third-largest sugar producer and the second-largest exporter, any jump in their output can influence global supply dynamics.

Reports on Sugar Production

Unica reported that Brazil’s Center-South sugar output for the 2024/25 season has dropped by 5.3% year-on-year through March, totaling 40.169 MMT. Additionally, the ISMA adjusted India’s sugar production forecast lower for 2024/25, now estimating 26.4 MMT due to reduced cane yields.

Global Sugar Market Deficits and Forecasts

On March 6, the International Sugar Organization (ISO) revised its forecast for the global sugar deficit in 2024/25 to -4.88 MMT, a considerable change from the -2.51 MMT predicted in November. They also lowered the global production forecast to 175.5 MMT, down from 179.1 MMT.

Impact of Climate on Production

Last year’s drought and heat in Brazil affected sugar crops severely, particularly in Sao Paulo, the nation’s leading sugar-producing region. Green Pool Commodity Specialists noted potential losses of up to 5 MMT of sugar cane due to fires. Conab, the Brazilian government crop forecasting agency, projected a decline of 3.4% year-on-year in 2024/25 sugar production to 44.118 MMT, primarily due to lower cane yields.

USDA’s Global Sugar Projections

According to the USDA’s bi-annual report released on November 21, global sugar production is projected to increase by 1.5% year-on-year, reaching a record 186.619 MMT. In tandem, human sugar consumption is expected to rise by 1.2% year-on-year, achieving a record 179.63 MMT. The USDA forecasted a 6.1% year-on-year reduction in global sugar ending stocks for 2024/25, totaling 45.427 MMT.

On the date of publication, Rich Asplund did not hold positions in any of the securities mentioned in this article. All information and data in this article are solely for informational purposes. For more details, please view the Barchart Disclosure Policy here.

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