Sugar prices have fallen for three days, driven by a weak Brazilian real and adjusted forecasts indicating a tighter global market. The ISO revised the 2024/25 global sugar deficit to -4.88 MMT, while India’s sugar production has dropped 14%. Additionally, Thailand projects a significant increase in sugar output, contributing to market pressures.
On Friday, sugar prices experienced a decline for the third consecutive day, with May NY world sugar 11 closing down by 1.96% and May London ICE white sugar 5 down by 1.32%. This drop can be attributed to the weakness of the Brazilian real, alongside forecasts of a tighter global sugar market as the International Sugar Organization (ISO) revised its estimate for the 2024/25 global sugar deficit upward to negative 4.88 million metric tons (MMT), indicating a shift from the previous surplus of 1.31 MMT.
Additionally, the ISO has lowered its global sugar production forecast for 2024/25 to 175.5 MMT, down from 179.1 MMT. In contrast, Green Pool Commodity Specialists predict a forthcoming surplus of 2.7 MMT in the 2025/26 crop year, following a deficit of 3.7 MMT anticipated for the current year.
Earlier in the week, sugar prices reached a peak not seen in two and a half months, fueled by a robust Brazilian real, which deterred export selling from sugar producers. However, recent production reports from India show a 14% decline in sugar production for the current marketing year, as indicated by the India Sugar and Bio-Energy Manufacturers Association.
Concerns over Brazil’s precipitation levels were raised by Alvean, the largest global sugar trader. Insufficient rainfall could result in underdeveloped sugarcane, delaying the upcoming sugar harvest. Conversely, the Indian government announced on January 20 that it would permit the export of 1 MMT of sugar, which could further influence global market dynamics.
The bearish outlook for sugar prices is compounded by increased production forecasts from Thailand. The Thai Office of the Cane and Sugar Board has projected an 18% rise in sugar production for the 2024/25 period, which may exacerbate market pressures. In Brazil, the adverse effects of drought and excessive heat on sugar crops are still being felt, with previous estimates for sugar production being revised downward.
Reports from the USDA indicated expected global sugar production growth for 2024/25 by 1.5% year-on-year, which coincides with rising human consumption. However, the USDA expects a decline in global sugar-ending stocks, projecting a reduction of 6.1% year-on-year. This complex backdrop of supply constraints and changing demand dynamics underscores the current volatility in sugar prices.
In summary, the recent decline in sugar prices is mainly influenced by the weakening of the Brazilian real, revision of global sugar forecasts, and adverse weather conditions in key production areas. While there is potential for changes in global sugar supply and demand dynamics, the market is currently reacting to reduced production forecasts, particularly in Brazil and India. Attention will remain on weather conditions and export policies affecting global production.
Original Source: www.tradingview.com
