Sugar prices are declining due to forecasts of rain in Brazil easing dryness fears and a weakening Brazilian real, which promotes exports. Recent production forecasts indicate reductions in sugar output, with notable changes from India and Brazil. The International Sugar Organization has announced a tightening market despite some optimistic projections for increased production in other regions.
On May 25, sugar prices experienced a decline, with May NY world sugar 11 (SBK25) dropping by 0.15 points to a price of -0.79%, and May London ICE white sugar 5 (SWK25) decreasing by 1.90 points or 0.35%. This reduction marks a continuation of the week’s downward trend, reaching a two-week low largely due to anticipated rain in Brazil, which alleviated concerns of dryness affecting sugar crops. Meteorologist Climatempo predicts widespread rains across Brazil’s sugar-growing regions throughout the week.
The Brazilian real has weakened, hitting a two-week low, which detrimentally impacts sugar prices. A depreciating real typically promotes export selling from Brazil’s sugar producers, thereby influencing the market further. This trend follows a previous period where sugar prices rose, with New York sugar reaching a one-month high and London sugar a four-month peak due to expectations of lower global sugar production.
Significant adjustments in production forecasts have been made recently, including a decrease in India’s 2024/25 sugar production estimate by the Indian Sugar and Bio-energy Manufacturers Association from 27.27 million metric tons (MMT) to 26.4 MMT. Additionally, Unica reported a 5.3% year-on-year fall in Brazil’s sugar output, projecting a cumulative production of 39.983 MMT through mid-March.
The International Sugar Organization (ISO) has revised its global sugar deficit forecast for 2024/25 to -4.88 MMT, highlighting a tighter market compared to the previous surplus in 2023/24. Meanwhile, the ISO also reduced its global sugar production projection from 179.1 MMT to 175.5 MMT, indicating tightening supply amidst shifting demand conditions.
Analysts remain divided on future production expectations. Datagro forecasts a 6% increase in Brazil’s sugar production in 2025/26, whereas Green Pool suggests a potential shift to a surplus of 2.7 MMT in the same crop year, following a deficit in 2024/25.
The Indian government’s decision to allow the export of 1 MMT of sugar this season could also affect market dynamics, easing prior restrictions. However, projections indicate that Indian sugar production may hit a five-year low at 26.4 MMT, a decrease of 17.5% year-on-year.
Further complicating the global sugar outlook, Thailand is set to boost its sugar production by 18% for the 2024/25 crop year, potentially reaching 10.35 MMT. Being the third-largest global sugar producer, such production increases could further apply downward pressure on sugar prices.
Severe weather events last season, including drought and heat, have detrimentally impacted Brazil’s top sugar-producing state of São Paulo, with losses of approximately 5 MMT of sugar cane reported. In light of these factors, Brazil’s government crop forecasting agency Conab reduced its 2024/25 sugar production estimate.
Based on the USDA’s November report, an overall increase in global sugar production to a record 186.619 MMT is forecasted for 2024/25. This increase is set against a backdrop of 1.2% anticipated growth in human sugar consumption, resulting in decreased ending stocks by 6.1%.
In summary, the sugar market is facing downward pressure due to several factors, including anticipated rain for Brazil’s sugar-growing regions, a weaker Brazilian real, and significant production adjustments from major sugar producers. The International Sugar Organization has noted a tightening market, although certain forecasts suggest increased production in Brazil and Thailand. Overall, market stability remains uncertain as various global parameters continue to evolve.
Original Source: www.tradingview.com
