Sugar prices have plummeted to 1-1/2 week lows amidst a revised forecast showing a global sugar deficit for 2024/25. The Brazilian real’s strength has curtailed exports, and decreasing production from India has contributed to these trends. Additionally, forecasts predict future surpluses as Thailand’s production rebounds, creating further pressure on prices.
In recent trading, May NY world sugar 11 (SBK25) decreased by 3.37% or -0.66, while May London ICE white sugar 5 (SWK25) fell by 2.49% or -13.80. The decline in sugar prices followed an increase in the global sugar deficit forecast for 2024/25 by the Brazilian real C, raising it from -2.51 MMT to -4.88 MMT, indicating a tightening market from the previous surplus of 1.31 MMT for 2023/24. Additionally, the ISO has downgraded its sugar production forecast for 2024/25 to 175.5 MMT from 179.1 MMT, suggesting further pressure on prices.
On February 5, Green Pool Commodity Specialists predicted a shift in the global sugar market, forecasting a surplus of 2.7 MMT for the 2025/26 crop year instead of the previously estimated deficit of 3.7 MMT for 2024/25. Earlier this week, sugar prices reached a two-and-a-half month high, continuing a significant upward trend that began in mid-January. The rising value of the Brazilian real, which increased from mid-December to mid-February against the dollar, discouraged exports from Brazil’s sugar producers and spurred considerable fund short-covering in sugar futures.
Support for sugar prices came from reports indicating a 12% year-over-year decrease in India’s sugar production, amounting to 19.7 MMT for the marketing year-to-date, as per the India Sugar and Bio-Energy Manufacturers Association. Alvean, the world’s largest sugar trader, noted on February 13 that insufficient rainfall in some Brazilian regions has hindered sugarcane growth, which may delay the upcoming harvest and negatively impact sugar production set to begin in April.
On the bearish side, India’s government announced on January 20 that it would permit the export of 1 MMT of sugar this season, easing prior restrictions aimed at maintaining domestic supply. The Indian Sugar Mills Association projects a significant drop in India’s sugar production for 2024/25, expected to fall by 15% year-over-year to reach a five-year low of 27.27 MMT. Similarly, expectations for increased sugar production in Thailand contribute to bearish sentiments, with projections from October 29 indicating an 18% year-over-year increase to 10.35 MMT for the 2024/25 season.
Brazil’s sugar crops faced challenges last year due to drought and severe heat, which led to fires in the leading sugar-producing state of Sao Paulo, resulting in potential losses of up to 5 MMT of sugarcane. Consequently, Brazil’s government crop forecasting agency Conab has revised its 2024/25 sugar production estimate down to 44 MMT, lowered from 46 MMT, primarily due to reduced sugarcane yields. According to Unica, cumulative sugar output from Brazil’s Center-South region fell by 5.6% year-over-year to 39.812 MMT through mid-February.
The USDA’s November 21 report projected a 1.5% year-over-year increase in global sugar production for 2024/25, reaching a record 186.619 MMT, with human sugar consumption expected to rise by 1.2% to a record 179.63 MMT. The report also forecasted a 6.1% decrease in global sugar ending stocks for 2024/25, predicting it would fall to 45.427 MMT.
At the time of publication, Rich Asplund did not hold any positions in the securities mentioned in this article. All data and information presented are solely for informational purposes. Further details can be found in the Barchart Disclosure Policy.
In conclusion, sugar prices are facing significant downward pressure due to a revised global sugar deficit forecast, diminished production in major regions, and a potential surplus anticipated for the next crop year. The decline in Brazil’s exports, alongside the bearish outlook from the Indian government and increased production estimates from Thailand, contribute to the complex landscape affecting sugar prices. Understanding these factors provides crucial insights into current market dynamics and future trends in sugar trading.
Original Source: www.tradingview.com
