Sugar Prices Decline Due to Rain Forecasts and Currency Weakness

Sugar prices have fallen to two-week lows due to anticipated rainfall in Brazil and a weakening Brazilian real, encouraging exports. Key reports indicate declining production forecasts for Brazil and India, while global sugar consumption is projected to rise. The market outlook remains bearish, with potential production increases in Thailand contributing to the pressure on prices.

Sugar prices have experienced a decline, with May New York world sugar 11 (SBK25) down by 0.15 cents or 0.79%, while May London ICE white sugar 5 (SWK25) decreased by 1.90 cents or 0.35%. This slump brings sugar prices to two-week lows, primarily driven by anticipated rain in Brazil, which alleviates dryness concerns in the sugar-growing regions, as reported by meteorologist Climatempo.

Additionally, the Brazilian real has weakened to a two-week low, further impacting sugar prices unfavorably. A weaker real incentivizes Brazilian sugar producers to increase their export activities, thereby contributing to the downward pressure on sugar prices. Previously, NY sugar reached a one-month high, alongside London sugar marking a four-month high, due to signs of diminished global sugar production.

A recent report by the Indian Sugar and Bio-energy Manufacturers Association suggests a reduction in India’s sugar production forecast for 2024/25 to 26.4 million metric tons (MMT), down from an earlier estimate of 27.27 MMT, attributing this change to lower cane yields. Similarly, Unica reported a decline of 5.3% year-on-year in Brazil’s Center-South sugar output for the current crop year, totaling 39.983 MMT. Sugar trader Czarnikow also revised its Brazil sugar production estimate for the 2025/26 season down to 42 MMT from 43.6 MMT.

Moreover, the International Sugar Organization (ISO) has increased its forecast for the global sugar deficit for 2024/25 to 4.88 MMT, in contrast to a previous estimation of 2.51 MMT. This reflects a tightening market in comparison to the globally surplus sugar production of 1.31 MMT for 2023/24. Additionally, the ISO has adjusted the global sugar production forecast for 2024/25 to 175.5 MMT, down from a November prediction of 179.1 MMT.

From a bearish perspective, the consulting firm Datagro anticipates a rise in Brazil’s sugar production for 2025/26 by 6% year-on-year to 42.4 MMT. Moreover, Green Pool Commodity Specialists predict the world sugar market shifting to a surplus of 2.7 MMT in the 2025/26 crop year, contrasting earlier deficit estimates.

The Indian government also allowed its sugar mills to export 1 MMT of sugar this season, relaxing prior restrictions that had been imposed since October 2023. This measure follows a previous season where India exported only 6.1 MMT of sugar, significantly lower than the record 11.1 MMT in the preceding period. However, forecasts from the India Sugar Mills Association (ISMA) indicate a 17.5% year-on-year drop in sugar production to a five-year low of 26.4 MMT for 2024/25.

Conversely, Thailand’s anticipated increase in sugar production poses additional bearish factors for sugar prices. The Office of Cane and Sugar Board in Thailand has projected a notable 18% rise in sugar production for 2024/25 to 10.35 MMT, up from 8.77 MMT in the 2023/24 season, reinforcing Thailand’s position as the third-largest sugar producer globally.

Last year’s drought and excessive heat in Brazil resulted in severe fires that damaged sugar crops, particularly in the Sao Paulo region. Green Pool Commodity Specialists highlighted that up to 5 MMT of sugar cane may have been lost due to these fires. Consequently, Conab lowered Brazil’s 2024/25 sugar production estimate to 44 MMT, down from the previous forecast of 46 MMT, due to lower yields caused by adverse weather conditions.

On November 21, the USDA projected an increase of 1.5% in global sugar production for the 2024/25 season to a record 186.619 MMT, alongside a 1.2% rise in global sugar consumption to reach 179.63 MMT. Furthermore, it estimated a 6.1% decline in global sugar ending stocks to 45.427 MMT for the same period.

In summary, the sugar market is currently experiencing downward pressure due to forecasts of increased rainfall in Brazil and a weakened Brazilian real. Despite some adjustments in production outlooks, both globally and regionally, conditions remain unfavorable for sugar prices due to a projected tightening market and potential export activities from Brazil and India. The situation warrants close monitoring as further developments unfold.

Original Source: www.tradingview.com