Oct NY world sugar #11 (SBV23) on Tuesday closed unchanged, and Oct London white sugar #5 (SWV23) closed -0.40 (-0.06).
Sugar prices Tuesday fell to 2-week lows but settled little changed after a rally in the Brazilian real sparked short covering in sugar futures. The real (^USDBRL) Tuesday climbed to a 1-week high against the dollar, discouraging export selling from Brazil's sugar producers.
Sugar prices have been under pressure since last Thursday when Conab raised its Brazil 2023/24 sugar production estimate to 40.9 MMT from an April forecast of 38.8 MMT as favorable weather conditions boosted sugarcane yields.
In another bearish factor, Unica on August 10 reported that Brazil Center-South sugar output in the second half of July rose +11.3% y/y to 3.681 MMT and that sugar output in the 2023/24 crop year through July rose +19.8% y/y to 19.167 MMT. Also, 48.62% of the crushed sugarcane was used for sugar production this year, an increase from 44.34% last year.
Sugar prices were undercut when India's Food Ministry on August 4 said the country's sugar stocks were sufficient and stood at 10.8 MMT at the end of July, dampening speculation that India might curtail sugar exports.
Sugar found support when sugar trader Czarnikow stated on August 7 that Thailand 2023/24 sugar production would drop -31% y/y to a 17-year low of 7.4 MMT due to dry weather. So far this year, rainfall in Thailand is well 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. Thailand is the world's third-largest sugar producer.
A bullish factor for sugar was the estimate from the Indian Sugar Mills Association (ISMA) on August 2 that India's 2023/24 sugar production would decline -3.4% y/y to 31.68 MMT. India is the world's second-largest sugar producer.
A bullish factor for sugar is concern 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 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. Meanwhile, ISO on August 10 projected 2023/24 global sugar production will fall -1.2% y/y to 174.8 MMT and that the global sugar market in 2023/24 will fall into deficit of -2.12 MMT from a 2022/23 global sugar surplus of +852,000 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.
