NY sugar prices dropped on rain forecasts for Brazil, impacting sugarcane yields. Despite reaching 2-week highs earlier, declining global production forecasts from countries like India and Brazil led to market confusion, compounded by weak demand signs and expectations of surpluses in upcoming crop years. Overall market factors highlight significant volatility in the sugar sector.
New York sugar prices fell on forecasts of rain in Brazil, which will likely improve sugarcane yields and alleviate dryness concerns. The May NY world sugar 11 contract closed down by 0.06 (-0.31%) on Friday, while the May London ICE white sugar 5 rose by 2.80 (+0.52%). The anticipated rain is a crucial factor influencing the market, as it offsets some of the supply concerns from earlier in the week.
Earlier this week, sugar prices had reached two-week highs due to reduced global sugar production forecasts. Unica reported a 5.6% year-on-year decrease in cumulative sugar output for the 2024/25 season, down to 39.822 million metric tons (MMT). Additionally, the Indian Sugar and Bio-energy Manufacturers Association revised its forecast for India’s sugar production down to 26.4 MMT, a significant reduction from January’s estimate of 27.27 MMT, indicating lower expected cane yields.
The International Sugar Organization also contributed to bearish sentiment by increasing its forecast for the global sugar deficit for 2024/25 to 4.88 MMT from a previous estimate of 2.51 MMT. It revised the global sugar production estimate down to 175.5 MMT. Green Pool Commodity Specialists mentioned that a surplus of 2.7 MMT is expected in 2025/26, contrasting the current year’s deficit.
On the downside, recent trends showed weak demand post-record deliveries of raw sugar against the March NY futures contract. Deliveries of 1.7 MMT by traders signal that the market may be flooded, raising concerns over sugar prices. Furthermore, Datagro’s projection indicated an increase in Brazil’s Center-South sugar production for 2025/26 to 42.4 MMT, boosting overall production prospects.
India has allowed its sugar mills to export 1 MMT this season, easing earlier export restrictions to ensure domestic supply. However, the India Sugar Mills Association predicts a -17.5% drop in 2024/25 production compared to previous years, reaching a five-year low of 26.4 MMT.
In Thailand, expectations for increased sugar production further pressure sugar prices. The Office of the Cane and Sugar Board projected an 18% increase in production for 2024/25, amounting to 10.35 MMT, emphasizing Thailand’s role as a major global sugar producer and exporter.
Brazil suffered crop damage due to last year’s drought and heat, affecting yields significantly. According to Green Pool, around 5 MMT of sugarcane were lost due to fire damage. Conab revised Brazil’s sugar production estimate down to 44 MMT, lower than previous forecasts, citing reduced yields due to adverse weather.
In the USDA’s bi-annual report, overall global sugar production is expected to rise by 1.5% in 2024/25 to 186.619 MMT, with human consumption expected to reach a record 179.63 MMT. Ending stocks are projected to decline by 6.1% year-on-year to 45.427 MMT, reflecting tighter market conditions.
In summary, NY sugar prices have reacted to weather forecasts for Brazil, which could improve sugar yields, while various global production estimates indicate a tightening market overall. Despite initial gains driven by declining production forecasts from key players like India and Brazil, bearish factors such as weak demand indicators and potential surpluses loom. These dynamics highlight the ongoing volatility in the sugar market, influenced by agricultural conditions and global consumption trends.
Original Source: www.tradingview.com
