Sugar prices have decreased due to rain forecasts in Brazil expected to improve cane yields. Reports indicate a decline in global sugar production, with significant adjustments in forecasts from Unica and ISO. Challenges such as weak demand and potential sugar surpluses in Brazil and Thailand add to the market’s uncertainty.
On May 25, sugar prices experienced a decline, with May NY world sugar 11 (SBK25) dropping by 0.18 points, approximately 0.94%. Furthermore, May London ICE white sugar 5 (SWK25) fell by 1.40 points, or 0.26%. This downward trend was attributed to rain forecasts in Brazil for the upcoming week, which are expected to alleviate dryness concerns and enhance sugarcane yields.
Earlier this week, sugar prices had surged to two-week highs due to indications of decreased global sugar production. Reports from Unica indicated that by February, the cumulative sugar output for the 2024/25 crop year in Brazil’s Center-South region had fallen by 5.6% year-on-year, totaling 39.822 million metric tons (MMT). Additionally, the Indian Sugar and Bio-energy Manufacturers Association revised its sugar production forecast for India to 26.4 MMT, down from a January estimate of 27.27 MMT, attributing the change to reduced cane yields.
The International Sugar Organization (ISO) recently adjusted its projections for the global sugar market, estimating a deficit of 4.88 MMT for the 2024/25 crop year, compared to a previous forecast of 2.51 MMT. Moreover, ISO reduced its forecast for global sugar production to 175.5 MMT, down from 179.1 MMT. In contrast, Green Pool Commodity Specialists forecast a surplus of 2.7 MMT for the 2025/26 crop year, transitioning from a 3.7 MMT deficit in 2024/25.
Last week, sugar prices hit seven-week lows due to waning demand, marked by record deliveries of raw sugar against the March NY futures contract, totaling 1.7 MMT. Such large receipts typically exert downward pressure on prices, suggesting limited options for sellers. Furthermore, projections by Datagro indicated that Brazil’s Center-South sugar production for 2025/26 may rise by 6% y/y to reach 42.4 MMT. Similarly, Czarnikow anticipates Brazil’s production could reach a record 43.6 MMT.
On January 20, the Indian government announced its intent to permit its sugar mills to export up to 1 MMT of sugar this season, easing prior restrictions imposed in 2023. India had limited export quantities to ensure sufficient domestic supplies, allowing only 6.1 MMT for the 2022/23 season. However, the India Sugar Mills Association forecasts a significant drop in sugar production for 2024/25 of 26.4 MMT, a 17.5% decrease year-on-year.
In Thailand, a positive outlook for sugar production poses bearish implications for sugar prices. The Office of the Cane and Sugar Board estimates a remarkable growth of 18% y/y, projecting production to reach 10.35 MMT for the 2024/25 season.
Recent adverse weather conditions, including drought and excessive heat last year, negatively impacted sugar agriculture in Brazil’s primary producing region, Sao Paulo. Green Pool estimates a potential loss of 5 MMT of sugarcane due to fires. In light of these events, Brazil’s Conab agency has revised down its sugar production estimate for 2024/25 to 44 MMT from a previous 46 MMT, citing lower yields.
The USDA’s bi-annual report, released on November 21, estimates that global sugar production will increase by 1.5% for 2024/25, reaching a record 186.619 MMT. It also anticipates a 1.2% growth in human sugar consumption, resulting in global consumption of 179.63 MMT, while forecasting a decline of 6.1% in ending stocks to 45.427 MMT.
In summary, the recent fluctuations in sugar prices can be attributed to several factors including favorable weather conditions in Brazil, adjustments in crop forecasts from various organizations, and shifting export policies in India. The interplay between production estimations and market dynamics continues to shape the outlook for sugar prices.
Original Source: www.tradingview.com
