July NY world sugar #11 (SBN23) on Tuesday closed down -0.21 (-0.79%), and Aug London white sugar #5 (SWQ23) closed unchanged.
Sugar prices Tuesday settled moderately lower. Weakness in sugar demand from China, the world's largest sugar importer, weighed on prices after China's Customs General Administration reported that China's May sugar imports sank -87% y/y to 40,000 MT.
The ongoing sugar harvest in Brazil is a negative factor for sugar prices. Last Tuesday, Unica reported Brazil's 2023/24 sugar production through May was up +37.7% y/y at 6.972 MMT and that the percentage of sugarcane crushed for sugar rose to 46.88% from 40.5% last year. 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 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.
Strength in the Brazilian real (^USDBRL) is also supportive for sugar after the real Monday rallied to a 1-year high against the dollar. The stronger the real discourages export selling from Brazil's sugar producers.
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.
