May NY world sugar #11 (SBK24) on Monday closed up +0.20 (+0.89%), and May London ICE white sugar #5 (SWK24) did not trade with markets in Europe closed for the Easter Monday holiday.
Sugar prices on Monday settled moderately higher, with NY sugar posting a 1-month high. Monday's rally in crude prices (CLK24) to a 5-month high is bullish for sugar. Strength in crude prices benefits ethanol prices and may prompt global sugar mills to divert more cane crushing toward ethanol production than sugar, thus curbing sugar supplies.
Limiting gains in sugar is the weakness in the Brazilian real (^USDBRL), which fell to a 5-month low Monday. The weaker real encourages export selling from Brazil's sugar producers.
Reduced sugar production in India is a bullish factor for prices. The Indian Sugar Mills Association (ISMA) stated on Mar 18 that India's 2023/24 sugar output from Oct through Mar 15 fell -0.7% y/y to 28.1 MMT. 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.
A bearish factor for sugar was last Wednesday's report from Unica that showed Brazil's Center-South sugar output in the first half of March was 64,000 MT, up +313% from the same time 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.
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 after the Thai Sugar Millers Corp projected on Feb 6 that Thailand's 2023/24 sugar production would fall by -32% y/y to a 17-year low of 7.5 MMT due to a severe drought. 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.
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.
