Decline in Sugar Prices Linked to Brazilian Real and Production Forecasts

Sugar prices have declined for three days, influenced by a weaker Brazilian real and lowered production forecasts. The global sugar deficit for 2024/25 has increased, while Indian production has fallen significantly. Weather concerns and production changes in Thailand are also influencing market dynamics. Additionally, USDA projects higher global production but decreasing stocks for the upcoming year.

Sugar prices have experienced a downturn for the third consecutive day, reaching two-week lows due to a decline in the Brazilian real. The May New York world sugar 11 decreased by 0.45 points (2.38%), while May London ICE white sugar 5 dropped by 9.20 points (1.70%). Recent forecasts from the C show a global sugar deficit of 4.88 million metric tons (MMT) for 2024/25, an increase from the earlier projected deficit of 2.51 MMT. The ISO has also revised its global sugar production forecast for the same period down to 175.5 MMT from 179.1 MMT.

A rally in sugar prices earlier in the week reached a new two-and-a-half-month high, spurred by a favorable Brazilian real that discouraged exports. Reports indicate that India’s sugar production has decreased by 14% year-over-year to 21.98 MMT for the marketing year so far. Additionally, the world’s leading sugar trader, Alvean, highlighted adverse weather conditions in Brazil affecting sugarcane development, potentially delaying the harvest set to begin in April.

Conversely, on January 20, the Indian government announced the allowance for sugar mills to export 1 MMT this season, easing previous restrictions to ensure domestic supply stability. Despite these measures, ISMA anticipates a 15% year-on-year decrease in India’s sugar production for 2024/25, reaching a five-year low of 27.27 MMT. Meanwhile, Thailand’s sugar production is projected to increase significantly, raising concerns for sugar market dynamics.

Drought and excessive heat last year resulted in substantial crop damage in Brazil, leading to significant losses of sugarcane. Recent estimates from Conab have reduced Brazil’s sugar production forecast for 2024/25 to 44 MMT, a decrease due to lower yields. The USDA’s November report projected global sugar production for 2024/25 to rise to a record 186.619 MMT, alongside a predicted increase in consumption and a decline in global ending stocks by 6.1%.

Rich Asplund disclaims any position in the securities mentioned within this article. The information provided is for informational purposes only, as per Barchart’s Disclosure Policy.

In summary, sugar prices are retreating amid a weakening Brazilian real, with forecasts indicating a tightening market for 2024/25. Decreased sugar production in India, adverse weather affecting crops in Brazil, and expected increases in Thailand’s sugar production contribute to the current situation. Notably, global sugar forecasts suggest significant production and consumption changes ahead, impacting market dynamics significantly.

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