Sugar Prices Facing Downward Trends Amid Brazilian Real Weakness

Sugar prices fell again on Friday, influenced by a weakening Brazilian real and revised sugar deficit forecasts. The USDA projected a tightening market ahead with falling production estimates from both Brazil and India, contrasting with increased predictions for Thailand. Market sentiments fluctuate amid varying production conditions across major sugar producers, creating cautious dynamics in the sugar market.

On Friday, May NY world sugar 11 (SBK25) decreased by 0.37 cents, a decline of 1.96%, while May London ICE white sugar 5 (SWK25) fell by 7.10 cents, representing a reduction of 1.32%. Sugar prices marked their third consecutive day of retreat, hitting two-week lows, primarily influenced by weakness in the Brazilian real. Additionally, the USDA revised its 2024/25 global sugar deficit forecast, increasing it from 2.51 MMT to 4.88 MMT, indicating a tightening market following a surplus in 2023/24.

Analysts from the ISO also lowered their global sugar production forecast for 2024/25, adjusting it down to 175.5 MMT from a previous estimate of 179.1 MMT. In contrast, Green Pool Commodity Specialists anticipated a shift to a 2.7 MMT surplus in the 2025/26 crop year from an estimated deficit of 3.7 MMT in the current season. On Tuesday, prices had climbed to a 2-1/2 month high, continuing the strong rally initiated since mid-January.

The recent strength of the Brazilian real, which peaked in mid-February, had reduced export selling pressure from Brazil’s sugar producers and encouraged substantial fund short-covering in sugar futures. Furthermore, India’s sugar production for the marketing year-to-date had fallen by 14% year-over-year to 21.98 MMT, according to the India Sugar and Bio-Energy Manufacturers Association, contributing positively to sugar prices.

Alvean, the leading global sugar trader, noted that inadequate rainfall in Brazil affects sugarcane development, potentially delaying the April harvest and adversely impacting production. Conversely, the Indian government announced on January 20 that it would permit the export of 1 MMT of sugar this season. This decision eases previous restrictions on exports, which had been implemented to maintain sufficient domestic supplies.

Currently, projections indicate that India’s sugar production for 2024/25 may decline by 15% year-over-year to a five-year low of 27.27 MMT. In Thailand, however, a forecasted 18% increase in sugar production to 10.35 MMT for 2024/25 could exert bearish pressure on sugar prices. The country’s production for the 2023/24 season ended at 8.77 MMT, highlighting Thailand’s significant role as a major sugar producer and exporter.

Brazil’s sugar production may also suffer due to prior drought conditions and excessive heat that affected the top-producing state, Sao Paulo, resulting in substantial crop damage. As reported by Green Pool Commodity Specialists, it is estimated that 5 MMT of sugarcane may have been lost due to fires. Consequently, Brazil’s Conab agency adjusted its sugar production forecast for 2024/25 to 44 MMT from a previous figure of 46 MMT.

The USDA’s bi-annual report, released on November 21, projected a rise in global sugar production to 186.619 MMT for 2024/25, alongside human sugar consumption reaching 179.63 MMT, both record highs. Additionally, global sugar ending stocks are expected to decrease by 6.1% to 45.427 MMT.

In summary, sugar prices are currently under pressure due to a weakening Brazilian real, a revised global sugar deficit forecast, and declining production estimates from key sugar-producing countries. The market faces challenges from rising sugar outputs in Thailand and the implications of reduced rainfall in Brazil, while Indian export allowances and anticipated declines in domestic production add complexity. Outlooks for the sugar market remain cautious as global production and consumption dynamics evolve.

Original Source: www.tradingview.com