Sugar prices rose sharply amid decreased production forecasts in Brazil and India. Notably, Brazil’s sugar output fell by 5.6% year-on-year, while India’s forecast was revised down to 26.4 MMT. A stronger Brazilian real has also reduced export willingness. Conversely, projections suggest increased production in Brazil and Thailand for future crop years. Overall, global sugar production is expected to tighten significantly.
Sugar prices have experienced a notable surge, with the May New York world sugar 11 (SBK25) closing up by 4.06% at +0.78 and the May London ICE white sugar 5 (SWK25) rising by 4.30% at +23.30. This increase was primarily driven by indications of a decrease in global sugar production. Reports from Unica indicate a 5.6% year-on-year reduction in Brazil’s Center-South sugar output for 2024/25, amounting to 39.822 million metric tons (MMT). Furthermore, the Indian Sugar and Bio-energy Manufacturers Association has revised its sugar production forecast for India from 27.27 MMT to 26.4 MMT due to lower sugarcane yields.
The recent gains in sugar prices were further enhanced when the Brazilian real strengthened against the dollar, thereby discouraging export activity among Brazil’s sugar producers. The International Sugar Organization (ISO) has also increased its projected global sugar deficit for 2024/25 from -2.51 MMT to -4.88 MMT, indicating a transition from a surplus observed in the previous year. In addition, the ISO has revised down its global production forecast for 2024/25 to 175.5 MMT.
Contrarily, some forecasts suggest potential increases in Brazil’s sugar production for the 2025/26 period, projecting an output of 42.4 MMT, which represents a 6% increase year-on-year per Datagro. Meanwhile, the sugar trader Czarnikow has projected a record production of 43.6 MMT in Brazil for the same crop year as producing sugar is more profitable than ethanol.
On a different note, the Indian government has relaxed sugar export restrictions, permitting the export of 1 MMT of sugar this season after a previous restriction since October 2023. The India Sugar Mills Association estimates a further decline in India’s sugar production to 26.4 MMT for 2024/25, constituting a five-year low.
The outlook for Thailand is less favorable for sugar prices, as the Office of the Cane and Sugar Board anticipates an 18% increase in sugar production for 2024/25, potentially reaching 10.35 MMT, following a production of 8.77 MMT in the prior season. Thailand maintains its position as the world’s third-largest sugar producer and second-largest exporter.
Factors such as drought and extreme temperatures last year have severely affected Brazilian sugar crops, especially in Sao Paulo, leading to an estimated loss of 5 MMT of sugarcane. Consequently, Brazil’s government crop forecasting agency, Conab, reduced its sugar production estimates from November, decreasing the forecast from 46 MMT to 44 MMT due to these unfavorable conditions.
The USDA, in its bi-annual report, forecasts a 1.5% increase in global sugar production for 2024/25, projected to reach 186.619 MMT, along with a predicted increase in global human sugar consumption of 1.2% to a record 179.63 MMT. It also anticipates a decline in global sugar ending stocks by 6.1% to 45.427 MMT.
In conclusion, sugar prices have surged due to reduced production estimates in major producing countries such as Brazil and India. While forecasts suggest slight increases in some areas, severe climatic conditions and previous export restrictions have contributed to market tightening. The situation remains dynamic, with additional factors in Thailand potentially weighing on global sugar prices. Monitoring these developments will be vital for stakeholders moving forward.
Original Source: www.tradingview.com
