Sugar prices fell for the third consecutive day, primarily due to the weakening Brazilian real and projections of a global sugar deficit in the 2024/25 season. Reports indicated falling sugar production in India while forecasts from Thailand suggested an increase. Weather conditions in Brazil remain concerning as they potentially impact future sugar yields, prompting a cautious outlook for the market.
On Friday, May NY world sugar 11 (SBK25) decreased by 0.37 cents (-1.96%), while May London ICE white sugar 5 (SWK25) fell by 7.10 cents (-1.32%). The sugar market has experienced a decline for three consecutive days, reaching two-week low levels. This drop is attributed to the weakening of the Brazilian real, against the backdrop of a tightened global sugar market forecast by C, which projects a 2024/25 deficit of 4.88 million metric tons (MMT), up from November’s estimate of 2.51 MMT. Meanwhile, the International Sugar Organization (ISO) has downgraded its global sugar production forecast to 175.5 MMT for 2024/25, down from the previous estimate of 179.1 MMT.
Earlier in the week, sugar prices peaked at a new 2-1/2 month high due to a significant rally triggered by a stronger Brazilian real, which discouraged sugar exports from Brazil. This rally was particularly evident from mid-December to mid-February when the Brazilian real peaked against the dollar, promoting substantial fund short-covering in sugar futures. Support for sugar prices was bolstered by a report indicating that India’s sugar production has fallen by 14% year-on-year (yr/yr) to 21.98 MMT year-to-date, as reported by the India Sugar and Bio-Energy Manufacturers Association.
Alvean, the largest sugar trader globally, pointed out that Brazil is facing below-average rainfall, which could lead to underdeveloped sugarcane in some areas. If the dry conditions persist, the sugar harvest scheduled for April may be delayed, negatively impacting sugar production. Furthermore, on January 20, the Indian government announced the allowance for its sugar mills to export 1 MMT of sugar, which eases previous export restrictions put in place to ensure sufficient domestic supplies. Despite these relaxations, the Indian Sugar Mills Association (ISMA) forecasts a 15% year-on-year decline in India’s 2024/25 sugar production, anticipating a five-year low of 27.27 MMT.
Conversely, forecasts from Thailand suggest an increase in sugar production, which may exert downward pressure on global sugar prices. According to Thailand’s Office of the Cane and Sugar Board, sugar production for 2024/25 is projected to surge by 18% year-on-year to reach 10.35 MMT, with the 2023/24 yield at 8.77 MMT. As a major exporter and the third-largest producer worldwide, Thailand’s production increase could affect global supply dynamics.
Past extreme weather in Brazil caused significant damage to sugar crops, notably in the key producing state of São Paulo, where widespread drought and fires resulted in losses of sugarcane. Green Pool Commodity Specialists estimate losses could reach 5 MMT. As a reaction, Conab, Brazil’s crop forecasting agency, revised its sugar production estimate for 2024/25 downward to 44 MMT from 46 MMT, citing diminished yields.
The USDA forecasted, in its November report, a 2024/25 global sugar production rise of 1.5% year-on-year, reaching a record 186.619 MMT, alongside a 1.2% increase in consumption to 179.63 MMT. Furthermore, it predicted a 6.1% reduction in global ending stocks to 45.427 MMT. This mixed outlook emphasizes the complexities of the global sugar market and potential supply constraints.
In conclusion, sugar prices are facing downward pressure mainly due to the weakness of the Brazilian real and forecasts indicating tighter global sugar production. Despite bullish support from declines in Indian production, expectations of increased output from Thailand and weather-related damage in Brazil add further uncertainty. Stakeholders in the sugar market must navigate these developments closely, as they indicate potential shifts in production and pricing strategies for the upcoming seasons.
Original Source: www.tradingview.com
