Sugar prices have declined due to forecasts of rain in Brazil, which could improve sugarcane yields. Following reports of lower global sugar production, concerns remain about market dynamics. Brazil and India are adjusting production forecasts, while Thailand anticipates a rise, adding to market complexities.
On May 11, the sugar market experienced a decline as May New York world sugar 11 (SBK25) fell by $0.18 (0.94%), and May London ICE white sugar 5 (SWK25) decreased by $1.40 (0.26%). The decline in sugar prices followed forecasts of rain in Brazil, anticipated for next week. Such precipitation is expected to alleviate dryness concerns and potentially enhance sugarcane yields, thus influencing the market negatively in the short term.
Earlier in the week, sugar prices reached a two-week high due to reports of decreased global sugar production. Notably, Unica disclosed that the cumulative 2024/25 sugar output in Brazil’s Center-South region through February fell by 5.6% year-on-year to 39.822 million metric tons (MMT). Additionally, Indian authorities reduced their 2024/25 sugar production forecast to 26.4 MMT from 27.27 MMT, attributing this adjustment to lower cane yields.
The International Sugar Organization (ISO) recently increased its deficit forecast for 2024/25 to 4.88 MMT, a significant rise from its previous prediction of 2.51 MMT. Consequently, the sugar market is tightening, contrasting with the surplus of 1.31 MMT recorded for the 2023/24 season. Furthermore, the ISO’s updated global production forecast for 2024/25 was lowered to 175.5 MMT, down from 179.1 MMT.
Sugar prices fell to seven-week lows last week due to a noted decrease in demand. Record deliveries of 1.7 MMT of raw sugar were reported by sugar traders Wilmar International Ltd and Sucres et Denrees SA against the March New York futures contract, highlighting a market scenario where sellers face limited options.
Bearish factors influencing sugar prices included projections from Datagro estimating Brazil’s Center-South sugar production to rise by 6% year-on-year to 42.4 MMT in 2025/26 and Czarnikow’s forecast of a record 43.6 MMT for the same timeframe. These projections reflect a trend where producing sugar is perceived as more profitable than ethanol.
The Indian government’s announcement in late January to permit sugar mills to export 1 MMT this season may also impact the market by alleviating past restrictions imposed to ensure sufficient domestic supplies. Although limited by previous export caps, projections by the Indian Sugar Mills Association (ISMA) indicate that 2024/25 production could drop by 17.5% year-on-year to a five-year low of 26.4 MMT.
In another bearish development, Thailand’s Office of the Cane and Sugar Board anticipates an 18% increase in sugar production for 2024/25, projecting output at 10.35 MMT. This increase is reflective of Thailand’s position as the third-largest sugar producer and the second-largest exporter globally.
Last year’s drought and heat led to significant crop damage in Brazil’s top-producing state, São Paulo, with as much as 5 MMT of sugar cane lost due to fires. Consequently, Brazil’s government agency Conab reduced its 2024/25 sugar production estimate to 44 MMT, down from 46 MMT, citing lower yields from adverse weather conditions.
The U.S. Department of Agriculture (USDA) projected a 1.5% year-on-year increase in global sugar production for 2024/25, reaching a record of 186.619 MMT. They also expect human sugar consumption to rise by 1.2% to 179.63 MMT, while global 2024/25 ending stocks are anticipated to decrease by 6.1% to 45.427 MMT.
In summary, the sugar market is currently witnessing price declines due to anticipated rainfall in Brazil, alleviating drought concerns and potentially benefiting sugarcane yields. Despite previous reports indicating decreased production, various forecasts continue to suggest a tightening in global sugar supplies. Manufacturers in both Brazil and India are adjusting their production forecasts, and while demand appears weak, external factors such as weather patterns and policy changes will continue to influence market dynamics.
Original Source: www.tradingview.com
