Recent declines in sugar prices are attributed to the weakening Brazilian real and updated production forecasts, with the International Sugar Organization reducing its 2024/25 production estimate. Reports indicate potential issues with sugarcane production in Brazil and varying forecasts from India and Thailand could impact the global sugar market significantly moving forward.
Sugar prices have been under pressure, with May NY world sugar closing down -0.37 (-1.96%) and May London ICE white sugar down -7.10 (-1.32%). This decline marks a third consecutive day of retreating prices, reaching two-week lows, largely influenced by the weakness of the Brazilian real. Additionally, C has raised its global sugar deficit forecast for 2024/25 to -4.88 million metric tons from the previous forecast of -2.51 million metric tons, indicating a tightening market as opposed to the surplus seen in the 2023/24 season.
The International Sugar Organization (ISO) has reduced its 2024/25 global sugar production estimate to 175.5 million metric tons, down from 179.1 million metric tons projected in November. Moreover, Green Pool Commodity Specialists anticipate a shift to a surplus of +2.7 million metric tons in the 2025/26 crop year from their prior forecast of a deficit of -3.7 million metric tons in 2024/25.
During the market week, sugar prices reached a two-and-a-half month high before declining. Rising values for the Brazilian real since mid-December deterred sugar exporters in Brazil and led to significant fund short-covering in sugar futures. Support for sugar prices emerged from reports indicating a 14% year-over-year decline in India’s sugar production, totaling 21.98 million metric tons this marketing year-to-date.
Concerns have been raised regarding subpar rainfall in Brazil affecting sugarcane growth, as reported by Alvean, the largest sugar trader. Delayed rainfall may prompt a lag in the upcoming sugar harvest set to begin in April, potentially impacting production adversely. Conversely, the Indian government’s recent allowance for exportation of 1 million metric tons of sugar may bolster exports but poses risks given an anticipated 15% year-over-year drop in India’s sugar production for 2024/25, projected at a five-year low of 27.27 million metric tons.
On the contrary, projections of increased sugar production in Thailand, expected to rise by 18% year-over-year to 10.35 million metric tons in 2024/25, clouds the outlook for sugar prices. This comes as Thailand stands as a major player, being the world’s third-largest sugar producer and second-largest exporter. Furthermore, Brazil has faced challenges due to droughts and fires that have led to considerable damage to sugar crops, notably in São Paulo.
Brazil’s government forecasting agency has also revised down its 2024/25 sugar production estimate to 44 million metric tons, attributing the cut to lower sugarcane yields from adverse weather conditions. Despite these setbacks, the USDA forecasts an increase in global sugar production by 1.5% year-over-year in 2024/25, aiming for a record 186.619 million metric tons, with a similar rise anticipated in consumption.
It is vital to note the context of these developments on the sugar market, particularly as the dynamics shift with escalating production forecasts in various regions and evolving trade policies. Sales trends and yield reports will continue to shape pricing outcomes within this market landscape.
In summary, sugar prices are experiencing downward pressure influenced by the weakness of the Brazilian real and shifting production forecasts. While there are signs of tightening from deficit projections, increased outputs from countries like Thailand and changes in India’s export policies could complicate the market landscape. The interplay of local and international production trends will be crucial in determining future sugar prices.
Original Source: www.tradingview.com
