In 2023, sugar prices saw an increase of over 5%
The price trend of sugar has experienced significant movements based on several fundamental factors. In 2023, sugar prices saw an increase of over 5% and traded near the 3500 level. One of the key drivers of this upward trend was the reduction in sugar production in India. The Indian Sugar Mills Association (ISMA) cut its projection for India’s sugar production to 32.7 million metric tons (MMT) for the CY22/23, compared to the previous year’s output of 35.76 MMT. By May 31, sugar production in India had already dipped over 8% to 32.24 MMT compared to 35.19 MMT during the same period the previous year. Furthermore, the estimated sugar stock at the end of CY2022/23 is significantly lower at 1 million metric tons, compared to 7 MMT last year. These reductions in production and stocks have contributed to the increase in sugar prices.
Another influential factor affecting the price trend of sugar is the revised projection by the International Sugar Organization (ISO) for a global sugar supply surplus in the 2022/23 season. The ISO sharply reduced its previous estimate of a 4.15 million-tonne surplus to just 850,000 tonnes. This adjustment was made based on lower production expectations in key regions such as Europe, China, Thailand, and India. In the United States, the Department of Agriculture (USDA) has also made adjustments to its sugar production projection, leading to changes in the price trend. The USDA reduced its estimate for the sugar stocks-to-use ratio for the 2023/24 season from 11.3% to 10.6%. This adjustment was made due to lower estimates for sugar production in the country. The USDA now projects U.S. sugar production at 9.12 million short tonnes (ST) for 2023/24, down from the previous estimate of 9.22 million ST.
Additionally, India’s sugar exports have played a role in shaping the price trend. Indian mills have shipped out the entire 6.1 million tonnes of sugar allowed for exports, taking advantage of the multi-year high prices in the global market and robust demand. However, due to a likely drop in production, it is unlikely that additional exports will be allowed in the current marketing year, which ends on September 30. This restriction on exports from India could potentially lift global prices and provide an opportunity for top producer Brazil to sell more sugar on the world market.
In summary, the price trend of sugar has been influenced by a combination of factors including reduced sugar production in India, revised global supply surplus projections, adjustments in the U.S. sugar production estimates, and the impact of Indian sugar exports. These fundamental factors have contributed to the upward movement in sugar prices, presenting challenges and opportunities for market participants.
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