July NY world sugar #11 (SBN23) on Wednesday closed -0.46 (-2.00%), while Aug London white sugar #5 (SWQ23) closed up +1.60 (+0.26%).
NY sugar prices on Wednesday extended the sharp 6-session sell-off and fell to a new 2-3/4 month low, generating more technical selling pressure.
Sugar prices have fallen sharply in the past week due to favorable Brazilian weather forecasts that have reduced the chances for damaging frost and paved the way for a quicker harvest.
Also, sugar production is running strong in Brazil. Unica reported Tuesday that Brazil Center-South sugar output in the first half of June rose +18.7% y/y to 2.550 MMT and that sugar production in the 2023/24 crop year through mid-June rose +32.1% y/y to 9.528 MMT. On Apr 26, Conab forecasted that Brazil's 2023/24 sugar output would climb +4.7% y/y to 38.8 MMT, the second most ever, as crops recover from the previous season's adverse weather.
Sugar prices were undercut by the June 18 news that China's May sugar imports sank -87% y/y to 40,000 MT. China is the world's largest sugar importer.
Sugar prices have support on concerns that an El Nino weather pattern could disrupt global sugar production. On June 8, the U.S. Climate Prediction Center said that sea surface temperatures across the equatorial Pacific Ocean had risen 0.5 degrees Celsius above normal, and wind patterns have changed to the point where El Nino criteria have been met. 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.
In April, sugar prices rallied to 11-year highs on the outlook for tighter global supplies. On Apr 26, the Indian Sugar Mills Association (ISMA) cut its 2022/23 India sugar production estimate to 32.8 MMT from a Jan estimate of 34 MMT. India's Food Secretary said India might not allow additional sugar exports this year due to lower-than-expected sugar production. India has allowed only 6 MMT of sugar exports in 2022/23 after permitting 11.2 MMT in 2021/22, down -46% y/y. The ISMA on Jan 31 cut its India 2022/23 sugar export estimate to 6.1 MMT from an Oct forecast of 9 MMT. Also, the ISMA said that it sees India's sugar mills diverting 4.5-5.0 MMT of sugar to ethanol production in 2022/23. India is the world's second-largest sugar producer.
The International Sugar Organization (ISO) on May 22 cut its 2022/23 global sugar production estimate to 177.4 MMT from a previous estimate of 180.4 MMT and cut its 2022/23 global sugar surplus estimate to 852,000 MT from a previous estimate of 4.15 MMT. ISO on May 4 forecasted a global 2023/24 sugar surplus of +2.1 MMT.
The USDA, in its bi-annual report released on May 25, projected that global 2023/24 sugar production would climb +6.0% y/y to a record 187.881 MMT and that global 2023/24 human sugar consumption would increase +2.3% y/y to a record 180.045 MMT. The USDA also forecasted that 2023/24 global sugar ending stocks would fall -15.2% y/y to a 5-year low of 33.455 MMT.
On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
