Surge in Sugar Prices Driven by Reduced Production Estimates in Brazil and India

Sugar prices have surged due to reduced production estimates in Brazil and India, with significant price increases noted in recent trading sessions. Forecasts indicate a tightening market, while Brazil’s currency strength impacts export decisions. Future projections suggest fluctuating production levels, particularly from Thailand, despite bearish forecasts from local analysts regarding Indian output.

Recent developments have led to a surge in sugar prices due to lowered production estimates in major producing countries, primarily Brazil and India. On Monday, May NY world sugar 11 closed at a three-week high of +4.06%, while May London ICE white sugar 5 saw a rise of +4.30%. This price increase reflects concerns regarding global sugar supply shortages fueled by recent production forecasts.

According to Unica, Brazil’s sugar output for the 2024/25 season has declined by 5.6% year-over-year, totaling 39.822 million metric tons (MMT) as of February. Similarly, the Indian Sugar and Bio-energy Manufacturers Association has revised India’s production forecast downward to 26.4 MMT from 27.27 MMT, attributing the decline to poorer cane yields.

The increase in sugar prices has been further accelerated by a strong performance of the Brazilian real, which reached a three-and-a-half week high against the dollar, discouraging local producers from exporting. The International Sugar Organization (ISO) also adjusted its global sugar deficit forecast upward, highlighting a contraction in supply versus a previous surplus.

Moreover, Green Pool Commodity Specialists indicated a substantial shift in the global sugar market, predicting a surplus of 2.7 MMT for the 2025/26 crop year, contrasting with the current forecasted deficit. Bearish projections were issued by Datagro, forecasting increased sugar production in Brazil for the following year.

The Indian government has allowed some exports despite previously imposed restrictions aimed at ensuring domestic supply. However, the India Sugar Mills Association anticipates a significant production dip for 2024/25.

On a different note, rising sugar production in Thailand, expected to increase by 18% year-over-year, may exert additional pressure on sugar prices. Drought and heat waves last year notably hindered production in Brazil, with damages reaching an estimated 5 MMT due to fires.

The USDA has also predicted that global sugar production will rise to a record 186.619 MMT for the 2024/25 season, while human sugar consumption is expected to increase, possibly resulting in reduced ending stocks.

The current surge in sugar prices can be attributed to decreased production forecasts from Brazil and India, coupled with a stronger Brazilian currency. While future projections indicate potential changes in production dynamics, particularly from Thailand, the immediate outlook suggests a tightening sugar market. Analysts and organizations continue to monitor these developments closely, providing updates on domestic and international sugar supply and pricing.

Original Source: www.tradingview.com