Sugar Prices Rally on Lackluster Rain in Brazil and Strength in Brazilian Real
Sugar prices hit a 2-month high due to concerns over Brazil’s crop, as dry weather threatens yields. A stronger Brazilian real also limits exports. India eased export restrictions but expects a 15% production drop in 2024/25. Thailand’s sugar output may rise 18%. Fires and drought hurt Brazil’s supply, while the USDA forecasts record global production and consumption.
March NY world sugar #11 (SBH25) on Friday closed up +0.25 (+1.24%), and May London ICE white sugar #5 (SWK25) closed up +8.10 (+1.53%).
Sugar prices on Friday extended this week’s rally to a new 2-month high on concern about Brazil’s sugar crop. Alvean, the world’s largest sugar trader, said on Thursday that below-average precipitation in Brazil means sugarcane is underdeveloped in some areas, and if showers remain weak, the sugar harvest that begins in April could be delayed, and sugar production would suffer.
Sugar prices have seen support from the 2-month-long rally in the Brazilian real (^USDBRL), which has discouraged export selling from Brazil’s sugar producers. The Brazilian real on Friday rallied to a new 3-month high against the US dollar.
In a bearish factor, the Indian government on January 20 said it would allow its sugar mills to export 1 MMT of sugar this season, easing its restrictions placed on sugar exports in 2023. India has restricted sugar exports since October 2023 to maintain adequate domestic supplies. India allowed mills to export only 6.1 MMT of sugar during the 2022/23 season to September 30 after allowing exports of a record 11.1 MMT in the previous season. However, the India Sugar Mills Association (ISMA) projects that India’s 2024/25 sugar production will fall -15% y/y to a 5-year low of 27.27 MMT. Also, Centrum reported last Tuesday that India’s 2024/25 sugar production from October 1 to January 31 was down -12.2% y/y to 16.5 MMT.
The outlook for higher sugar production in Thailand is bearish for sugar prices. On October 29, Thailand’s Office of the Cane and Sugar Board projected that Thailand’s 2024/25 sugar production would jump by +18% y/y to 10.35 MMT. Thailand produced 8.77 MMT of sugar in the 2023/24 season that ended in April. Thailand is the world’s third-largest sugar producer and the second-largest sugar exporter.
Drought and excessive heat last year caused fires in Brazil that damaged sugar crops in Brazil’s top sugar-producing state of Sao Paulo. Sugar cane industry group Orplana said that as many as 2,000 fire outbreaks affected up to 80,000 hectares of planted sugarcane in Sao Paulo. Green Pool Commodity Specialists noted that as much as 5 MMT of sugar cane may have been lost due to the fires. Conab, Brazil’s government crop forecasting agency, cut its 2024/25 Brazil sugar production estimate from November 21 to 44 MMT from a previous forecast of 46 MMT, citing lower sugarcane yields due to drought and excessive heat. Unica reported Thursday that cumulative 2024/25 Center-South sugar output through January fell -5.5% y/y to 39.805 MMT.
The USDA, in its bi-annual report released November 21, projected that global 2024/25 sugar production would climb +1.5% y/y to a record 186.619 MMT and that global 2024/25 human sugar consumption would increase +1.2% y/y to a record 179.63 MMT. The USDA also forecasted that 2024/25 global sugar ending stocks would decline -6.1% y/y to 45.427 MMT.
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Source : Nasdaq.com
