Sugar Prices Decline on Favorable Rain Forecasts in Brazil

Sugar prices have decreased following rain forecasts for Brazil, easing dryness concerns and possibly enhancing sugarcane yields. Despite initial price rallies due to lower global production, recent reports predict diminished yields in key sugar-producing countries, impacting the overall market with a tightening supply scenario. The USDA also anticipates a rise in global sugar production despite this year’s challenges.

Sugar prices have witnessed a decline, with May New York world sugar 11 decreasing by 0.18 cents, or 0.94%, and similar trends seen with May London ICE white sugar 5 dropping by 1.40 cents, or 0.26%. This downward movement follows forecasts indicating rain in Brazil, expected to ease dryness concerns and potentially improve sugarcane yields.

This week, sugar prices initially rose, reaching two-week highs due to indications of decreased global sugar production. Reports from Unica noted a 5.6% decrease year-over-year in sugar output from Brazil’s Center-South region. In another report, the Indian Sugar and Bio-energy Manufacturers Association revised its 2024/25 sugar production forecast, reducing it from 27.27 MMT to 26.4 MMT due to diminishing cane yields.

Further compounding the tightening sugar market, the International Sugar Organization (ISO) revised its global sugar deficit estimate for 2024/25 to 4.88 MMT, up from the previously predicted 2.51 MMT. Additionally, the ISO lowered its 2024/25 global sugar production forecast from 179.1 MMT to 175.5 MMT. Green Pool Commodity Specialists also forecast that the sugar market will shift to a surplus of 2.7 MMT for the 2025/26 crop year.

Recent data showed sugar prices creating new lows over seven weeks as weak demand emerged, particularly influenced by significant deliveries of raw sugar by traders Wilmar International Ltd and Sucres et Denrees SA against the expired March NY futures contract. Such large deliveries suggest limited market alternatives for sellers, acting as a bearish signal.

Anticipations for heightened sugar production in Brazil serve as another bearish indicator. Projections suggest Brazil’s sugar production for the 2025/26 season could reach 42.4 MMT, a 6% increase year-over-year. Similarly, Czarnikow estimates Brazil’s output could escalate to a record 43.6 MMT.

India’s governmental decision to permit the export of 1 MMT of sugar has added negative sentiment to pricing. Though previously restrictive, the government aims to support its domestic market after allowing only 6.1 MMT during the previous season. The India Sugar Mills Association forecasts production will drop significantly, by 17.5%, to a five-year low of 26.4 MMT for the 2024/25 season.

Data from Thailand indicating a projected 18% rise to 10.35 MMT sugar production for the 2024/25 season casts additional bearish prospects on global sugar prices. As the world’s third-largest sugar producer and second-largest exporter, Thailand’s increased output could affect overall market prices significantly.

The previous year’s drought and heat conditions caused considerable damage to Brazil’s sugar crops, particularly in Sao Paulo where losses reached approximately 5 MMT. Consequently, Brazil’s government agency Conab cut its 2024/25 sugar production estimate, foreseeing a decrease to 44 MMT, down from an initial forecast of 46 MMT.

The USDA has projected a 1.5% increase in global sugar production in 2024/25, with anticipated record levels for production and consumption. Final estimates suggest an ending stock decline of 6.1%, amounting to 45.427 MMT.

In summary, sugar prices have declined due to forecasts of rain in Brazil, raising expectations for improved sugarcane yields. Reports of reduced global sugar production and the tightening market in various countries, including Brazil and India, contribute to market volatility. Additionally, the increase in Thailand’s sugar production has further implications for future pricing, suggesting a complex global sugar market influenced by multiple factors.

Original Source: www.tradingview.com