Sugar prices saw moderate declines on Friday, with March NY world sugar #11 (SBH25) falling by 0.19 (-1.03%) and March London ICE white sugar #5 (SWH25) dropping by 6.40 (-1.32%). Despite these losses, prices remained above the significant lows seen earlier in the week. Over the past three months, sugar prices have trended lower, largely due to a more favorable global sugar supply outlook.
The International Sugar Organization (ISO) revised its 2024/25 global sugar deficit forecast downward in November, now estimating a shortfall of 2.51 million metric tons (MMT), a reduction from its previous projection of 3.58 MMT. Additionally, the ISO raised its 2023/24 global sugar surplus estimate to 1.31 MMT, compared to the previous estimate of just 200,000 metric tons.
India’s sugar production outlook has also contributed to the shifting market dynamics. India, which currently estimates a 1 MMT sugar surplus for the season, may permit exports if surplus supplies remain after meeting domestic ethanol blending requirements. India’s Food Secretary, Chopra, suggested in December that exports could be allowed under these conditions.
In contrast, the outlook for sugar production in Thailand is exerting downward pressure on prices. Thailand, the world’s third-largest sugar producer, is expected to see an 18% year-over-year increase in its 2024/25 sugar output, reaching an estimated 10.35 MMT. This surge in production follows a season in which Thailand produced 8.77 MMT of sugar, further solidifying its position as the second-largest sugar exporter globally.
A notable development has been the growing short position in London sugar, which could trigger a short-covering rally. According to the Commitment of Traders (COT) report, funds increased their net-short position by 2,322 contracts in the week ending January 7, reaching a five-year high of 2,515 net short positions.
Domestically, India’s sugar production has been adversely affected by smaller-than-expected output, offering some support to prices. The Indian Sugar and Bio-energy Manufacturers Association (ISM) reported a 15.5% year-over-year decline in production between October 1 and December 31, reaching 9.54 MMT. This reduction in production could lead the Indian government to maintain its export restrictions, which would limit global sugar supplies.
Brazil’s sugar production has also been affected by adverse weather conditions, including drought, excessive heat, and fires that ravaged sugarcane crops in the state of Sao Paulo. The country’s sugarcane industry group, Orplana, reported that fires had damaged up to 80,000 hectares of sugarcane, with losses potentially reaching 5 MMT of sugar cane. In light of these challenges, Brazil’s government crop forecaster, Conab, revised its 2024/25 production estimate down to 44 MMT, down from a previous projection of 46 MMT.
Despite the lower production forecasts, some factors remain supportive of sugar prices. For example, in August, India’s Food Ministry lifted restrictions on sugar mills producing ethanol for the 2024/25 year, which could prolong the country’s sugar export curbs. India has restricted sugar exports since October 2023 to ensure adequate domestic supplies.
India’s overall sugar production for the 2024/25 season is expected to fall by 2% year-over-year, according to the ISM. The association has also projected that India’s sugar reserves will total 8.4 MMT as of September 30, down from earlier estimates of 9.1 MMT.
The USDA’s latest report, released on November 21, indicates a modest increase in global sugar production for 2024/25, projected to rise by 1.5% to a record 186.619 MMT. However, the report also forecasts a slight decline in global sugar ending stocks, which are expected to drop by 6.1% year-over-year, reaching 45.427 MMT.
As sugar market conditions continue to evolve, the balance between global production, export policies, and weather-related disruptions will play a pivotal role in determining future price trends.
