Sugar prices have dropped sharply, reaching 1-1/2 week lows, amid increased global deficit forecasts from Brazil and reduced production estimates for 2024/25. The market dynamics are further driven by a weaker Brazilian real, a decrease in India’s production, and projected surpluses in Thailand. These factors suggest a potential tightening of sugar supplies in the coming years.
On May 25, the New York world sugar 11 (SBK25) experienced a decline of 0.66 to reach -3.37%. Likewise, the May London ICE white sugar 5 (SWK25) saw a drop of 13.80, or 2.49%. These price reductions come as the Brazilian real raises the global sugar deficit forecast for 2024/25 to -4.88 million metric tons (MMT), a significant change from November’s estimate of -2.51 MMT, indicating a tightening market contrasting with the previous surplus of 1.31 MMT for 2023/24.
The International Sugar Organization (ISO) has also revised its production forecast for 2024/25, reducing it to 175.5 MMT from an earlier prediction of 179.1 MMT. Conversely, Green Pool Commodity Specialists forecast a subsequent surplus of +2.7 MMT for the 2025/26 crop year, marking a change from the current projected deficit of -3.7 MMT for 2024/25.
Sugar prices, which had rallied to a 2-1/2 month high, extended a notable upward trend that began in January, supported by a stronger Brazilian real which discouraged export sales by local producers. Additionally, the decline in India’s sugar production—down 12% year-on-year to 19.7 MMT—provided further support to sugar prices, as reported by the India Sugar and Bio-Energy Manufacturers Association.
On February 13, Alvean highlighted that insufficient rainfall in Brazil has resulted in underdeveloped sugarcane, potentially delaying the harvest scheduled for April and negatively impacting sugar production. A bearish development occurred when the Indian government announced on January 20 that sugar mills would be permitted to export 1 MMT this season, softening strict export limitations imposed in 2023, which had restricted sugar exports to 6.1 MMT during the preceding season.
Projected increases in Thai sugar production are another factor that could negatively affect sugar prices. On October 29, Thailand’s Office of the Cane and Sugar Board estimated production for 2024/25 would rise 18% to 10.35 MMT, following a production level of 8.77 MMT in the previous season. Similar environmental challenges have plagued Brazil, as drought and heat last year caused significant crop damage, particularly in São Paulo, contributing to a forecasted decline in sugar output to 44 MMT for 2024/25, down from 46 MMT.
The U.S. Department of Agriculture (USDA) indicated that global sugar production will increase by 1.5% year-on-year to a record 186.619 MMT for 2024/25, with consumption growing by 1.2% to 179.63 MMT, although ending stocks are expected to decrease by 6.1% to 45.427 MMT.
The recent fluctuations in sugar prices reflect a complex interplay of market dynamics, particularly influenced by the weakening Brazilian real and revised production forecasts. The outlook for global sugar production shows potential shifts from deficits to surpluses, influenced by climatic conditions and government policies regarding exports. The ongoing situation necessitates careful monitoring as it could impact both production and pricing significantly in future seasons.
Original Source: www.tradingview.com
