Sugar prices soared on May 1, 2023, due to reduced production forecasts from Brazil and India. The ISO projected a significant global sugar deficit and decreased production estimates while Brazil’s sugar production shows prospects of recovery, amidst bearish signals from increased production forecasts elsewhere. The USDA expects a rise in global sugar consumption, despite challenges posed by climatic factors affecting crop yields.
On May 1, 2023, sugar prices experienced significant gains with New York’s world sugar 11 closing at $20.15, an increase of 4.06%. Concurrently, May London ICE white sugar 5 reached $21.95, up 4.30%. This surge in sugar prices is attributed to declining global production estimates, particularly from Brazil and India. Unica reported a 5.6% year-on-year reduction in Brazil’s sugar output through February, totaling 39.822 million metric tons (MMT). Additionally, the Indian Sugar and Bio-energy Manufacturers Association revised its production forecast for 2024/25 down to 26.4 MMT from the earlier estimate of 27.27 MMT due to lower cane yields.
Furthermore, sugar gains were accelerated by a strengthened Brazilian real against the dollar, which traditionally inhibits export activities among Brazilian sugar producers. The International Sugar Organization (ISO) raised its forecast for the global sugar deficit to 4.88 MMT from a previous estimate of 2.51 MMT, indicating a tightening market compared to the surplus of 1.31 MMT seen in the preceding year. Concurrently, the ISO lowered its global sugar production forecast for 2024/25 to 175.5 MMT, down from an earlier 179.1 MMT.
Positive production projections from Brazil may provide bearish pressure on sugar prices. Datagro anticipates that Brazil’s sugar output for the 2025/26 crop year will rise by 6% to 42.4 MMT, while Czarnikow predicts a record 43.6 MMT production due to the profitability of sugar over ethanol. Additionally, the Indian government has allowed its sugar mills to export 1 MMT this season, lifting some of the restrictions previously imposed.
The forecast for increased sugar production in Thailand is another bearish factor. The Office of the Cane and Sugar Board predicts a notable 18% increase in Thailand’s 2024/25 sugar production, reaching 10.35 MMT. Excessive heat and drought have previously ravaged crops in Brazil’s Sao Paulo state, with Green Pool estimating that potential losses could total 5 MMT. Conab has since revised Brazil’s production estimate down to 44 MMT due to these adverse conditions.
As reported by the USDA, global production for 2024/25 is expected to increase by 1.5% to a record 186.619 MMT, accompanied by a forecasted 1.2% rise in human consumption to 179.63 MMT. This report also anticipates a 6.1% reduction in global sugar ending stocks to 45.427 MMT. It is important to note that Rich Asplund, the author of this article, currently holds no direct or indirect positions in any securities discussed herein, with all data provided solely for informational purposes.
In conclusion, sugar prices have surged due to reduced production estimates from Brazil and India, with notable contributing factors being the stronger Brazilian real and the ISO’s elevated deficit projections. Despite projections for potential production increases in Brazil and globally, adverse weather conditions and crop damage continue to impact overall supply estimates. Stakeholders must remain vigilant as market conditions evolve and further updates are provided regarding sugar production and pricing trends.
Original Source: www.tradingview.com
