Sugar prices have fallen sharply due to a weakened Brazilian real and revised forecasts indicating a significant global sugar deficit for 2024/25. The ISO has reduced production estimates, while India anticipates decreased production. Conversely, Thailand is forecasted to see a rise in sugar production, contributing to mixed market signals for sugar prices.
Sugar prices experienced a significant decline, with May NY world sugar 11 falling by 3.37% and London ICE white sugar 5 down by 2.49%. The decline was influenced by the revision of the global sugar deficit forecast for 2024/25, which increased to -4.88 million metric tons (MMT) from a previous estimate of -2.51 MMT. This change signals a constricting market, contrasting with a surplus of 1.31 MMT in 2023/24.
The International Sugar Organization (ISO) also adjusted its production forecast for 2024/25 down to 175.5 MMT from 179.1 MMT. Meanwhile, Green Pool Commodity Specialists reported that the global sugar market is expected to shift into a surplus of +2.7 MMT in the 2025/26 crop year, reversing the projected deficit for 2024/25.
On Tuesday, sugar prices hit a 2-1/2 month high, continuing a rally initiated in mid-January, largely attributed to a strengthened Brazilian real against the dollar which reduced export activity from Brazilian producers. Additionally, there was substantial short-covering by funds in the sugar futures market.
Support for sugar prices arose from news that India’s production fell 12% year-on-year to 19.7 MMT, as reported by the India Sugar and Bio-Energy Manufacturers Association. Concurrently, Alvean highlighted that insufficient rainfall in Brazil could delay the upcoming sugar harvest in April, potentially lowering production.
Conversely, a bearish factor emerged from the Indian government allowing sugar mills to export an additional 1 MMT this season, easing previous restrictions. The India Sugar Mills Association (ISMA) anticipates a further drop in Indian sugar production, forecasting a -15% decrease to a five-year low of 27.27 MMT for 2024/25.
Thailand’s sugar production outlook remains bearish for global prices, with projections indicating an 18% increase to 10.35 MMT for 2024/25. This increases the competition as Thailand is the world’s third-largest producer. Drought conditions in Brazil resulted in crop damage, with Green Pool noting a loss of up to 5 MMT of sugarcane.
Brazil’s government crop agency, Conab, recently revised its production estimate for 2024/25 down to 44 MMT, citing lower yields due to drought. Unica’s report indicated a 5.6% year-on-year reduction in cumulative sugar output through mid-February compared to the previous year.
The USDA projects that global sugar production will grow by 1.5% year-on-year to 186.619 MMT for 2024/25, with consumption also increasing by 1.2% to a record 179.63 MMT. This report expected a decline in ending stocks by 6.1% to 45.427 MMT.
In summary, the Brazilian real’s weakness has significantly impacted sugar prices, leading to a sharp decline. The revised global sugar deficit and lowered production estimates contribute to a bearish outlook for sugar, despite some supporting factors like decreased production in India. However, Thailand’s expected production increase poses further challenges for sugar pricing. Overall, market dynamics are shifting, influenced by various global factors.
Original Source: www.tradingview.com
