October NY world sugar #11 (SBV24) Monday closed down -0.11 (-0.49%), and December London ICE white sugar #5 (SWZ24) closed down -0.40 (-0.07%).
Sugar prices Monday gave up an early advance and closed lower, with NY sugar falling back from a 6-3/4 month high and London sugar falling back from a 5-1/2 month high. Weakness in the Brazilian real sparked long liquidation in sugar after the real (^USDBRL) fell to a 1-week low against the dollar Monday. The weaker real encourages export selling by Brazil's sugar producers.
Sugar prices on Monday initially rallied due to concerns that ongoing drought conditions in Brazil would reduce its sugar production. Last Friday, Rabobank cut its 2024/25 Brazil sugar production forecast to 39.3 MMT from a previous forecast of 40.3 MMT, citing excessive dryness.
Drought and excessive heat have caused massive fires in Brazil that have 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 said that as much as 5 MMT of sugar cane may have been lost due to the fires.
Sugar has carryover support from September 12, when Unica reported that Center-South sugar production in the second half of August fell -6.0% y/y to 3.258 MMT. Although, for the 2024/25 season through August, sugar production is up +3.9% y/y to 27.169 MMT.
In a supportive factor for sugar prices, the International Sugar Organization (ISO) on August 30 forecasted a 2024/25 global sugar deficit of -3.58 MMT, much larger than the estimated -200,000 MT deficit for 2023/24. ISO forecasted 2024/25 global sugar production of 179.3 MMT, down -1.1% y/y from 181.3 MMT in 2023/24.
Meanwhile, Conab, Brazil's government crop forecasting agency, cut its 2024/25 Brazil Center South sugar production estimate on August 22 to 42 MMT from a previous forecast of 42.7 MMT, citing lower sugarcane yields due to drought and excessive heat.
In another supportive factor for sugar prices, India's Food Ministry on August 30 lifted restrictions on sugar mills producing ethanol for the 2024/25 year that starts November, which may prolong India's sugar export curbs. Last December, India ordered sugar mills to stop using sugarcane to produce ethanol for the 2023/24 supply year to boost its sugar reserves. 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.
A bearish factor for sugar is optimism that above-average monsoon rains in India will lead to a bumper sugar crop. The Indian Meteorological Department reported last Monday that India received 862.3 mm of rain during the current monsoon season as of September 16, or 8% more than the comparable long-term average of 801.5 mm. India's monsoon season runs from June through September.
The Indian Sugar and Bio-energy Manufacturers Association (ISM) on July 3 reported India's 2023/24 sugar reserves at 9.1 MMT and reported a surplus of 3.6 MMT. Separately, the ISM reported on May 13 that India's 2023/24 sugar production from Oct-Apr fell -1.6% y/y to 31.4 MMT. Also, the ISM on July 30 projected India's 2024/25 sugar production would fall by -2% y/y to 33.31 MMT.
Record heat in Thailand that may damage the country's sugarcane crops is bullish for sugar prices. On May 6, Thailand's Meteorological Department said that more than three dozen of Thailand's 77 provinces posted record-high temperatures in April, with new highs beating records as far back as 1958. Sugar millers in Thailand are reporting the lowest yield from crushed cane this year in at least 13 years. However, Thailand's government on April 22 estimated that Thailand's 2023/24 sugar production from Dec-Apr 17 was 8.77 MMT, above a Feb estimate from the Thai Sugar Millers Corp for sugar production of 7.5 MMT. Thailand is the world's third-largest sugar producer and the second-largest sugar exporter.
The USDA, in its bi-annual report released on May 23, projected that global 2024/25 sugar production would climb +1.4% y/y to a record 186.024 MMT and that global 2024/25 human sugar consumption would increase +0.8% y/y to a record 178.788 MMT. The USDA forecasted that 2024/25 global sugar ending stocks would fall -4.7% y/y to a 13-year low of 38.339 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.
