The Brazilian real’s weakness has resulted in a decrease in sugar prices, with May NY sugar #11 down by 3.37% and London ICE white sugar #5 down by 2.49%. Increased forecasts for the global sugar deficit coupled with lower production estimates from Brazil and India contribute to this trend. Despite potential production increases in Thailand, adverse weather conditions in Brazil are pushing prices lower.
In recent trading, May New York world sugar 11 (SBK25) decreased by -0.66 (-3.37%), while May London ICE white sugar 5 (SWK25) fell by -13.80 (-2.49%). Sugar prices plummeted to their lowest levels in one and a half weeks after the Brazilian real raised its global sugar deficit forecast for 2024/25 to -4.88 million metric tons (MMT) from a prior estimate of -2.51 MMT. This adjustment signifies a tightening market compared to the 2023/24 global sugar surplus of 1.31 MMT.
Additionally, the International Sugar Organization (ISO) revised its forecast for global sugar production in 2024/25 down to 175.5 MMT from 179.1 MMT in November. Green Pool Commodity Specialists projected a turnaround in the global sugar market, anticipating a surplus of +2.7 MMT for the 2025/26 crop year, reversing their earlier deficit estimation of -3.7 MMT for 2024/25.
In a contrasting trend, sugar prices saw a rise to a new 2.5-month high on Tuesday, reflecting a steep rally that commenced mid-January. The Brazilian real demonstrated strength against the dollar from mid-December to mid-February, discouraging exports from sugar producers in Brazil and prompting significant fund short-covering in sugar futures.
Support for sugar prices was also attributed to reports from the India Sugar and Bio-Energy Manufacturers Association, indicating a year-over-year drop of -12% in India’s sugar production, totaling 19.7 MMT for the marketing year-to-date between October 1 and February 15.
Concern arises from Alvean, the world’s largest sugar trader, which reported on February 13 that insufficient rainfall in Brazil is hindering sugarcane development. Should the dry weather persist, the commencement of the sugar harvest in April may be delayed, adversely impacting sugar production.
On a more negative note, the Indian government announced plans to permit its sugar mills to export 1 MMT of sugar this season, easing the restrictions imposed in 2023. These limitations were initially intended to secure domestic sugar availability. The India Sugar Mills Association (ISMA) forecasts a compelling decline of -15% year-over-year in India’s 2024/25 sugar production, potentially reaching a five-year low of 27.27 MMT.
Moreover, an increase in sugar production in Thailand is perceived as bearish for sugar prices. Thailand’s Office of the Cane and Sugar Board projects an 18% increase in sugar output for the 2024/25 season, estimating production at 10.35 MMT, following the production of 8.77 MMT in the 2023/24 season. As the world’s third-largest sugar producer and second-largest exporter, Thailand’s rise in output is significant.
Brazil faced adverse climatic conditions, particularly excessive heat, which resulted in fires damaging sugar crops in Sao Paulo, the country’s prime sugar-producing region. Green Pool Commodity Specialists estimate a loss of approximately 5 MMT of sugarcane due to these fires. Furthermore, Brazil’s government crop forecasting agency, Conab, has lowered its estimated sugar production for the 2024/25 season to 44 MMT, down from a previous estimate of 46 MMT due to lower yields.
According to the USDA’s biannual report published on November 21, global sugar production for 2024/25 is anticipated to rise by 1.5% year-over-year, reaching a record of 186.619 MMT. Additionally, global sugar consumption is expected to grow by 1.2% to a record 179.63 MMT. The USDA also forecasts a decline in global 2024/25 sugar ending stocks by 6.1% to 45.427 MMT.
In conclusion, recent developments indicate a prominent tightening in the sugar market driven by a weaker Brazilian real, along with diminished production forecasts both in Brazil and India. While production is predicted to increase in Thailand, adverse climatic events in Brazil and changes in export policies significantly impact global sugar prices. Market analysts will continue to monitor these trends as they evolve.
Original Source: www.tradingview.com
