October NY world sugar #11 (SBV24) Friday closed down -0.31 (-1.61%), and Oct London ICE white sugar #5 (SWV24) closed down -3.80 (-0.71%).
Sugar prices posted moderate losses on Friday, with NY sugar falling to a 1-1/2 week low. Friday's fall in crude prices (CLV24) to a 14-month low pressured sugar prices. The weakness in crude undercuts ethanol prices and may prompt the world's sugar mills to divert cane crushing toward sugar production rather than ethanol, thus boosting sugar supplies.
Sugar prices last week rallied to 1-1/2 month highs as drought and excessive heat have caused massive fires in Brazil that have 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. Also, Czarnikow on Tuesday cut its Brazil Center-South 2024/25 sugar production estimate to 39.2 MMT from 40.0 MMT due to drought and fire damage. In addition, Covrig Analytics raised its 2024/25 global sugar deficit estimate Tuesday to -600,000 MT from a previous estimate of -300,000 MT.
In a supportive factor for sugar prices, the International Sugar Organization (ISO) last Friday 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.
Meanwhile, Conab, Brazil's government crop forecasting agency, cut its 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.
In another supportive factor for sugar prices, India's Food Ministry last Friday 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.
Increased sugar production in Brazil is a negative factor for sugar prices. Unica reported last Wednesday that in the 2024/25 marketing year through mid-August, Brazil's Center-South sugar production was up by +5.4% y/y to 23.91 MMT.
Optimism that above-average monsoon rains in India will lead to a bumper sugar crop is a bearish factor for sugar prices. The Indian Meteorological Department reported Monday that India received 777.6 mm of rain during the current monsoon season as of September 3, or 8% more than the comparable long-term average of 721.1 mm. India's monsoon season runs from June through September.
The Indian Sugar and Bio-energy Manufacturers Association (ISM) on July 3 reported India's 2023/24 sugar reserves at 9.1 MMT and reported a surplus of 3.6 MMT. Separately, the 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 July 30 projected India's 2024/25 sugar production would fall by -2% y/y to 33.31 MMT.
Record heat in Thailand that may damage the country's sugarcane crops is bullish for sugar prices. On May 6, Thailand's Meteorological Department said that more than three dozen of Thailand's 77 provinces posted record-high temperatures in April, with new highs beating records as far back as 1958. Sugar millers in Thailand are reporting the lowest yield from crushed cane this year in at least 13 years. However, Thailand's government on April 22 estimated that Thailand's 2023/24 sugar production from Dec-Apr 17 was 8.77 MMT, above a Feb estimate from the Thai Sugar Millers Corp for sugar production of 7.5 MMT. Thailand is the world's third-largest sugar producer and the second-largest sugar exporter.
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.
