March NY world sugar #11 (SBH25) on Monday closed down -0.18 (-0.81%), and December London ICE white sugar #5 (SWZ24) closed down -6.00 (-1.06%).
Sugar prices on Monday saw continued weakness due to ramped-up sugar production in Brazil's Center-South, the country's largest sugar-producing region. Unica reported last Friday that sugar output in Brazil's Center-South region during the first half of October rose +8% y/y to 2.443 MMT. Also, cumulative 2024/25 Center-South sugar output through the first half of October rose +1.9% to 35.591 MMT.
Forecasts for rain in Brazil's Center-South this week may alleviate drought concerns and are bearish for sugar prices. Meteorologist Climatempo forecasted rain for this week in Brazil's Center-South, which would keep temperatures milder and improve soil moisture levels.
An excessive long position by funds in London sugar may fuel long liquidation and exacerbate any price downturn. Last Friday's weekly Commitment of Traders (COT) report showed funds boosted their net-long London sugar positions by 954 in the week to October 22 to 42,351 net-long positions, the most since data began in 2011.
Recent drought and excessive heat caused fires in Brazil that 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. Conab, Brazil's government crop forecasting agency, cut its overall 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. Similarly, Rabobank, on September 20, cut its 2024/25 Brazil sugar production forecast to 39.3 MMT from a previous forecast of 40.3 MMT, citing excessive dryness. Also, Datagro cut its 2024/25 Center-South sugar production estimate on Monday to 38.7 MMT from a September estimate of 39.3 MMT, citing drought and limited capacity by mills.
Optimism that above-average monsoon rains in India will lead to a bumper sugar crop is bearish for sugar prices. The Indian Meteorological Department reported that India received 934.8 mm of rain during the current monsoon season as of September 30, the most in four years and 7.6% more than the comparable long-term average of 868.6 mm. India's monsoon season runs from June through September.
In a 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. However, on October 3, the Indian Sugar and Bio-energy Manufacturers Association (ISM) said India will have 2 MMT of sugar to export next season and urged the government to lift its current sugar export restrictions.
The Indian Sugar and Bio-energy Manufacturers Association (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 September 26 projected India's 2024/25 sugar production would fall by -2% y/y to 33.3 MMT and that India's 2023/24 sugar reserves will be at 8.4 MMT on September 30, compared with a May projection of 9.1 MMT.
The outlook for higher sugar production in Thailand is bearish for sugar prices. Last Tuesday, Thailand's Office of the Cane and Sugar Board projected that Thailand's 2024/25 sugar production would jump by +18% y/y to 10.35 MMT. Thailand produced 8.77 MMT of sugar in the 2023/24 season that ended in April. Thailand is the world's third-largest sugar producer and the second-largest sugar exporter.
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.
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.
