Sugar prices have seen a decrease due to rain forecasts in Brazil expected to boost yields. Initial gains were prompted by lower global production reports, but delivery increases from traders indicate market weakness. Both Brazilian and Indian production projections have fluctuated, further impacting market dynamics.
Sugar prices experienced a decline today due to positive rain forecasts for Brazil. The May New York world sugar 11 dropped by -0.18 (-0.94%) and the May London ICE white sugar 5 decreased by -1.40 (-0.26%). These predictions from Somar Meteorologia indicate widespread rainfall next week, alleviating concerns over dryness and potentially enhancing sugarcane yields.
Earlier in the week, sugar prices reached two-week highs amid signs of reduced global sugar production. Unica reported a year-on-year decrease in cumulative sugar output from Brazil’s Center-South region by -5.6% for the 2024/25 season, resulting in a total of 39.822 million metric tons (MMT) through February. Similarly, the Indian Sugar and Bio-energy Manufacturers Association lowered its 2024/25 production forecast due to diminished cane yields.
The International Sugar Organization (ISO) increased its global sugar deficit forecast for 2024/25 to -4.88 MMT, indicating a tightening market compared to the previous surplus of 1.31 MMT for 2023/24. The ISO also revised its global production estimates downward to 175.5 MMT, reflecting lesser supply than earlier predicted. Additionally, Green Pool Commodity Specialists forecast a shift to a surplus of +2.7 MMT for the 2025/26 crop year.
Recent market fluctuations have seen sugar prices plummet to seven-week lows due to signs of weak demand. This downturn coincided with record deliveries of raw sugar totaling 1.7 MMT made by traders Wilmar International Ltd and Sucres et Denrees SA against the March New York futures contract, which typically signals an oversupply in the market.
Bearish indications also arose from Datagro’s projection of increased sugar production in Brazil, with an estimated 42.4 MMT for 2025/26. Furthermore, Czarnikow anticipates record levels of sugar production in Brazil at 43.6 MMT, driven by the profitability of sugar versus ethanol. The Indian government has also lifted some export restrictions, allowing sugar mills to export 1 MMT this season, despite expectations of a production decrease.
In addition, Thailand is predicted to increase sugar production significantly by 18% y/y for the 2024/25 season, contributing to the bearish outlook for sugar prices as they solidify their position as a major global sugar supplier.
Drought and heat in previous seasons have severely impacted Brazilian sugar crops, particularly in São Paulo, designated as the country’s leading sugar-producing state. Various agencies have adjusted Brazil’s sugar production estimates downwards due to lower yields caused by these conditions. Conversely, the USDA anticipates a global sugar production increase of +1.5% year-on-year, projecting the highest levels ever recorded.
The recent decline in sugar prices is primarily attributed to forthcoming rain forecasts in Brazil, expected to enhance sugarcane yields. While global production concerns had initially supported prices, reports of significant deliveries and increased projections from major sugar-producing regions have contributed to a bearish market sentiment. The changes in domestic and international production forecasts further indicate a complex market landscape for sugar moving forward.
Original Source: www.tradingview.com
