Main Highlights
- Sugar prices are showing resilience, recovering from recent lows, partly influenced by a stronger Brazilian real which makes exports less attractive for Brazilian producers.
- Global supply has been a dominant bearish factor, with increased production reported in Brazil and optimistic crop outlooks in India, though India’s export restrictions add complexity.
- Concerns about potential weather impacts in Thailand and differing international organization forecasts for global supply and demand highlight the market’s volatility.
- Projections indicate a potential global sugar deficit for 2023/24, however, forecasts for 2024/25 suggest record production and consumption, with a notable decrease in ending stocks.
Sugar Market Price Dynamics
October NY world sugar #11 futures (SBV24) experienced a slight uptick, trading up by 0.11%, while the Oct London ICE white sugar #5 (SWV24) remained steady. Sugar prices are demonstrating a recovery from recent one-week lows. This rebound is significantly bolstered by the appreciating Brazilian real, which is nearing a four-week high against the US dollar. The stronger real makes it less economically appealing for Brazilian sugar exporters to sell their produce on the international market.
Global Sugar Supply Insights
Despite the recent price support derived from currency movements, the sugar market has been under considerable downward pressure over the past month. This pressure stems from indications of a robust global supply. Notably, New York sugar futures had recently touched a 1.5-year low, and London sugar futures hit a 2.3-year low, reflecting these bearish supply sentiments.
In Brazil, data from Unica reported an 8% year-over-year increase in sugar production within the Center-South region for the marketing year ending July, reaching 20.753 million metric tons (MMT). This expansion contributes to the surplus of global sugar supplies, acting as a drag on prices.
India’s Monsoon Outlook and Production Potential
The outlook for India’s monsoon season is also playing a crucial role in shaping market sentiment. Optimistic forecasts for above-average monsoon rains have emerged as a bearish factor for sugar prices. As of August 11, the Indian Meteorological Department reported that the country had received 579.7 mm of rain during the June-to-September monsoon period. This figure represents a 7% surplus compared to the long-term average for the corresponding period, suggesting the potential for a substantial sugar harvest.
Brazilian Sugar Production Forecasts
Brazil’s agricultural agency, Conab, released projections in late April indicating that the country’s sugar production for the 2024/25 marketing year could reach a record 46.292 MMT. This would mark a 1.3% increase compared to the previous year. This anticipated growth is attributed to an expected 4.1% expansion in sugar acreage, bringing the total cultivated area to 8.7 million hectares, the largest in seven years. For the recently concluded 2023/24 marketing year, Brazilian sugar output experienced a significant surge of 25.7% year-over-year, reaching 42.425 MMT, according to Unica.
Indian Export Restrictions and Domestic Focus
In contrast to Brazil’s expanding production, India’s government has maintained its restrictions on sugar exports. This policy aims to ensure sufficient domestic supply and support the nation’s ethanol production initiatives. The Indian Sugar and Bio-energy Manufacturers Association (ISM) reported that India held 9.1 MMT of sugar reserves in early July for the 2023/24 season, with surpluses estimated at 3.6 MMT. India has implemented export curbs since October 2023. For the 2022/23 season, India permitted only 6.1 MMT of exports, a considerable reduction from the record 11.1 MMT in the prior season. The ISM also indicated a slight year-over-year decrease of 1.6% in India’s 2023/24 sugar production from October to April, totaling 31.4 MMT. Projections for the 2024/25 season suggest a further potential decline of 2%, forecasting production at 33.31 MMT.
Thai Weather Concerns and Production Estimates
Record-high temperatures in Thailand have raised concerns about potential damage to the country’s sugarcane crops, which could introduce a bullish element into the sugar market. Thailand’s Meteorological Department noted in early May that numerous provinces recorded temperatures exceeding historical records in April, with some data going back to 1958. Sugar millers are reporting the lowest yields from crushed cane in at least 13 years. Despite these weather-related challenges, the Thai government’s estimate for 2023/24 sugar production (December to mid-April) was revised upward to 8.77 MMT, surpassing earlier industry forecasts.
Shifting Global Supply-Demand Balances
The International Sugar Organization (ISO) has revised its global sugar deficit estimate for the 2023/24 marketing year upward to -2.95 MMT. This is a substantial increase from its previous February projection of -689,000 metric tons. The ISO also adjusted its global sugar demand estimate for the same period to 182.2 MMT, an increase from 180.4 MMT, citing higher consumption figures from India. These revisions underscore a tightening global balance for the current marketing year.
Long-Term USDA Projections
The USDA, in its May report, has forecasted a record global sugar production of 186.024 MMT for the 2024/25 marketing year. This figure represents a 1.4% increase year-over-year. Concurrently, global human sugar consumption is expected to rise by 0.8% to a record 178.788 MMT. Despite the anticipated rise in both production and consumption, the USDA projects that global sugar ending stocks for 2024/25 will decrease by 4.7% to a 13-year low of 38.339 MMT.
Analytical Summary and Outlook
The sugar market is currently navigating a complex landscape shaped by global production trends, weather patterns, and national agricultural policies. While recent price recovery has found support from currency fluctuations and supportive global deficit estimates for the current year, persistent factors like increasing production in key regions such as Brazil, coupled with favorable monsoon outlooks in India, continue to exert bearish pressure. Future price movements will likely depend on ongoing assessments of crop yields, the evolution of export policies, and broader macroeconomic influences.