Oct NY world sugar #11 (SBV23) on Monday closed -0.52 (-2.14%), and Oct London white sugar #5 (SWV23) closed -16.30 (-2.38%).
Sugar prices Monday closed lower after WTI crude oil fell more than -1% on Monday. Weaker crude prices undercut ethanol prices and may prompt global sugar mills to divert more cane crushing toward sugar production rather than ethanol, thus boosting sugar supplies.
Also, drier conditions in Brazil have accelerated Brazil's sugar harvest and are negative for sugar prices. Favorable Brazilian weather forecasts also reduced the chances of damaging frost. Sugar production is running strong in Brazil. Unica reported last Tuesday that Brazil Center-South sugar output in the second half of June rose +7.6% y/y to 2.695 MMT and that sugar output in the 2023/24 crop year through June rose +25.9% y/y to 12.228 MMT. Also, 47.68% of the crushed sugarcane was used for sugar production this year, an increase from 42.56% last year.
The recent favorable weather conditions in Brazil prompted sugar trader Czarnikow to raise its 2023 Center-South sugar production forecast by 500,000 MT to 38.2 MMT. Also, Datagro on June 29 forecasted that Brazil's Center-South, the main sugar-growing region, will produce a record 39.1 million tons of sugar in the 2023/24 marketing year that began in April, up +16% y/y.
Last Friday, sugar prices climbed to 3-week highs on signs of strong demand after there were only 124,250 MT of white sugar deliveries to settle against the expiring August London sugar contract, down -45% from last year. Smaller deliveries are a bullish sign since that suggests that there aren't many sellers interested in delivering physical sugar.
Sugar prices have support from excessive dryness in Thailand, the world's third-largest sugar producer, which may curb the country's sugar production. So far this year, rainfall in Thailand is 28% below the same period last year, and the onset of the El Nino weather system could lower precipitation even further over the next two years. Czarnikow Group predicts Thai sugar production this year could fall for the first time in three years and may drop to the second lowest since 2009/10.
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.
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. On May 4, ISO 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 13-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.
