Decline in Sugar Prices Amid Brazilian Real Weakness and Production Changes

Sugar prices have declined for three days, now at a two-week low, influenced by a weakening Brazilian real. Studies have shown a projected global sugar deficit for 2024/25, alongside a decrease in production forecasts. Although Indian sugar production is expected to fall, Thailand anticipates increased production, presenting a mixed outlook for sugar prices.

Sugar prices have experienced a decline for the third consecutive day, reaching two-week lows, primarily attributed to the depreciation of the Brazilian real. Current data indicates that May NY world sugar 11 (SBK25) has decreased by 0.45, or 2.38%, while May London ICE white sugar 5 (SWK25) has fallen by 9.20, or 1.70%. Furthermore, a report by C on Thursday projected a global sugar deficit of 4.88 million metric tons (MMT) for 2024/25, a substantial increase from the previous forecast of 2.51 MMT.

In parallel, the International Sugar Organization (ISO) revised its 2024/25 global sugar production forecast to 175.5 MMT, down from 179.1 MMT. Green Pool Commodity Specialists also announced on February 5 their forecast predicting a transition to a global sugar surplus of 2.7 MMT in the 2025/26 crop year, which is a turnaround from the anticipated deficit of 3.7 MMT for 2024/25. This overall tightening follows a surplus of 1.31 MMT in 2023/24.

Sugar prices were initially bolstered by the rising value of the Brazilian real from mid-December to mid-February, which hindered exports and led to significant short-covering in sugar futures. However, recent reports indicate a 14% decline in India’s sugar production, now standing at 21.98 MMT year-on-year for the marketing period running from October 1 to February 28. Alvean, the largest sugar trader globally, noted that suboptimal rainfall in Brazil has resulted in underdeveloped sugarcane, potentially delaying the harvest commencing in April and negatively impacting production.

On a related note, the Indian government announced on January 20 its decision to permit exports of 1 MMT of sugar, easing the restrictions it had placed in October 2023. Previously, India had limited its exports to maintain domestic supplies, with only 6.1 MMT exported in the 2022/23 season, compared to a peak of 11.1 MMT earlier. However, the India Sugar Mills Association (ISMA) forecasts a 15% year-on-year decline in production for 2024/25 to a five-year low of 27.27 MMT.

Moreover, an anticipated increase in sugar production in Thailand poses bearish implications for sugar prices. According to Thailand’s Office of the Cane and Sugar Board, 2024/25 sugar production is expected to rise by 18% year-on-year to 10.35 MMT, up from 8.77 MMT in the previous season. Historical droughts and excessive heat caused significant crop damage in Brazil’s main sugar-producing regions, with Green Pool estimating losses of up to 5 MMT of sugarcane.

Consequently, Brazil’s government forecasting agency, Conab, has adjusted the country’s sugar production estimate for 2024/25 to 44 MMT from 46 MMT, citing reduced yields. Cumulative sugar output in the Center-South region has fallen by 5.6% year-on-year to 39.812 MMT as reported by Unica. In its biannual report, the USDA projected an overall increase in global sugar production to a record 186.619 MMT, along with a rise in consumption to 179.63 MMT and a 6.1% reduction in ending stocks to 45.427 MMT.

As of the publication date, Rich Asplund has disclosed no positions in any mentioned securities.
For further details, please refer to the Barchart Disclosure Policy.

In summary, sugar prices have retreated due to a weakened Brazilian real, a revised production forecast indicating a tighter market for 2024/25, and adverse weather conditions affecting sugarcane yield. The Indian government’s easing of export regulations adds complexity as forecasts indicate a potential drop in production. While increased output in Thailand remains a bearish factor, global consumption is projected to rise, forecasting an interesting future for the sugar market.

Original Source: www.tradingview.com

About Allegra Nguyen

Allegra Nguyen is an accomplished journalist with over a decade of experience reporting for leading news outlets. She began her career covering local politics and quickly expanded her expertise to international affairs. Allegra has a keen eye for investigative reporting and has received numerous accolades for her dedication to uncovering the truth. With a master's degree in Journalism from Columbia University, she blends rigorous research with compelling storytelling to engage her audience.

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