Sugar Prices Post Moderate Losses as Supply Concerns Ease
Sugar prices hit 2-1/2 week lows on Tuesday due to Thailand’s higher-than-expected 2023/24 sugar production, but reports of India potentially increasing ethanol production buoyed the market. India’s sugar output rose slightly, while Brazil’s surged, contributing to bearish sentiment. Reduced Indian and Thai production, coupled with the impact of El Nino on sugar crops, supported prices. The USDA projected a record global production but lower ending stocks, indicating a tight market ahead.
Sugar prices on Tuesday extended Monday’s losses to 2-1/2 week lows. Sugar prices have been under pressure since last Wednesday when Thailand’s Office of the Cane and Sugar Board reported that Thailand’s 2023/24 sugar production from Dec-Mar was 8.75 MMT, above a Feb estimate from the Thai Sugar Millers Corp for sugar production of 7.5 MMT.
Sugar prices have underlying support from reports that India may allow sugar mills to use more sugar to make ethanol, a move that could suggest the government will not ease sugar export curbs anytime soon. The Indian government is considering allowing factories to use an additional 800,000 MT of sugar for ethanol production this year.
Sugar also has bearish carryover pressure from last Tuesday when the Indian Sugar and Bioenergy Manufacturers Association reported that India’s 2023/24 sugar production from Oct-Mar rose +0.4% y/y to 30.2 MMT as more sugar mills stayed open to crush sugarcane. As of Mar 31, 322 Indian sugar mills had closed operations, compared with 346 mills closed at the same time last year.
A bearish factor for sugar in the report from Unica on Mar 27 that showed Brazil’s Center-South sugar output in the first half of March was 64,000 MT, up +313% from last year. Also, Brazilian sugar output so far in the 2023-24 marketing year through mid-March is up +25.8% y/y to 42.245 MMT. Brazil’s sugar mills have ramped up their cane crushing for more sugar and less ethanol. Mills have crushed 48.96% of total cane for sugar production this year, up from 45.93% last year.
Reduced sugar production in India is a bullish factor for prices. The 2023 (Jun-Sep) monsoon rain was 6% below average, the poorest monsoon rainfall in 5 years. In October, India extended restrictions on sugar exports from Oct 31 until further notice in an attempt to maintain adequate domestic supplies. India allowed mills to export only 6.1 MMT of sugar during the 2022/23 season to Sep 30 after allowing exports of a record 11.1 MMT in the previous season. India is the second-largest sugar producer in the world.
On the bearish side for sugar, the Indian Sugar and Bioenergy Manufacturers Association on Mar 13 raised its forecast for India’s sugarcane production in the 2023-24 marketing year (that began on Oct 1) by +2.9% to 34 MMT from January’s forecast of 33.05 MMT. Higher sugarcane production likely means higher refined sugar production, depending on how much of that sugarcane is converted into ethanol.
Reduced Thai sugar production is bullish for sugar prices. Rainfall in Thailand has been below the same period last year, and the current El Nino weather system could continue to depress rainfall in Thailand. Sugar millers in Thailand are reporting the lowest yield from crushed cane this year in at least 13 years. Thailand is the world’s third-largest sugar producer and the second-largest sugar exporter.
Sugar prices are seeing support from this year’s El Nino weather event. An El Nino weather pattern typically brings heavy rains to Brazil and drought to India, negatively impacting sugar crop production. The last time El Nino brought dryness to sugar crops in Asia was in 2015 and 2016, which caused prices to soar.
The USDA, in its bi-annual report released on Nov 23, projected that global 2023/24 sugar production would climb +4.7% y/y to a record 183.461 MMT and that global 2023/24 human sugar consumption would increase +1.2% y/y to a record 178.431 MMT. The USDA also forecasted that 2023/24 global sugar ending stocks would fall -13.3% y/y to a 13-year low of 33.681 MMT. The International Sugar Organization (ISO) on Feb 28 raised its 2023/24 global sugar deficit estimate to -689,000 MT from a November estimate of -335,000 MT.
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