Sugar prices fell this week due to rain forecasts in Brazil likely improving yields. Reports of lower global sugar production from regions like Brazil and India have influenced market trends. However, increased production forecasts from Thailand and weak demand signals pose bearish risks to sugar prices, complicating market dynamics.
On May NY world sugar 11 (SBK25), prices decreased by -0.18 (-0.94%), while May London ICE white sugar 5 (SWK25) fell -1.40 (-0.26%). This decline followed forecasts of rain in Brazil that could improve sugarcane yields, easing dry conditions for producers.
The initial rise in sugar prices earlier this week was driven by indications of lower global sugar production. Reports from Unica indicated a 5.6% year-over-year drop in cumulative Center-South sugar output for the 2024/25 season, amounting to 39.822 million metric tons (MMT). Similarly, India’s sugar production forecast was reduced by the Indian Sugar and Bio-energy Manufactures Association to 26.4 MMT for 2024/25 due to anticipated lower cane yields.
The International Sugar Organization (ISO) has adjusted its global sugar deficit forecast to -4.88 MMT for 2024/25, significantly higher than November’s estimate of -2.51 MMT, indicating a tightening market. Furthermore, the ISO has reduced its global sugar production forecast to 175.5 MMT for the same period. Green Pool Commodity Specialists also projected a shift from a supply deficit to a surplus of 2.7 MMT by 2025/26.
Despite these supply concerns, sugar prices fell to seven-week lows due to weak demand signals. Notably, high deliveries by sugar traders Wilmar International Ltd and Sucres et Denrees SA indicated that sellers were struggling to find buyers, typically bearish for market prices. Additionally, a rise in Brazil’s sugar production projected by Datagro contributed to negative sentiments in the market.
On the Indian front, the government’s recent decision to permit the export of 1 MMT of sugar this season, after imposing restrictions since October 2023, contributed to bearish market conditions. Current projections also suggest continued declines in India’s sugar production due to poor yields.
Thailand presents another bearish forecast with anticipated sugar production increasing by 18% year-on-year to 10.35 MMT. The country’s prominence as the third-largest sugar producer globally adds to the competitive environment.
Brazil’s sugar crops have suffered from drought and heat, leading to significant losses. Estimates suggest that up to 5 MMT of sugar cane may have been destroyed. The Brazilian government’s crop forecasting agency has adjusted its production estimate downwards due to these adverse conditions.
The USDA projects an increase in global sugar production by 1.5% year-over-year, reaching a record 186.619 MMT for 2024/25, while consumption is also expected to rise. However, ending stocks may decline by 6.1%, offering a complex outlook for global sugar markets.
Sugar prices have declined due to favorable rain forecasts in Brazil, which could boost sugarcane yields and ease previous drought concerns. Global production reports indicate significant output reductions, particularly in Brazil and India, which further impacts market expectations and prices. Conversely, increasing production forecasts from Thailand contribute to negative sentiment in the global sugar market. The ongoing challenge of managing supply and demand dynamics remains critical for stakeholders in the sugar industry.
Original Source: www.tradingview.com
