July NY world sugar #11 (SBN23) on Wednesday closed down -0.32 (-1.24%), and Aug London white sugar #5 (SWQ23) closed down -5.40 (-0.76%).
Sugar prices Wednesday closed moderately lower. Sugar prices were undercut Wednesday by a rally in the dollar index (DXY00) to a 2-month high. Also, dry conditions in Brazil are facilitating the country's sugar harvest. Rural Clima Meteorlogia said little rain is expected in Brazil through the end of the month. Unica reported on May 12 that Brazil's 2023/24 sugar production through April was up +43.7% y/y at 1.531 MMT and that the percentage of sugarcane crushed for sugar rose to 41.6% from 35.3% last year.
Last month, 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.
Another supportive factor for sugar was Monday's action by the International Sugar Organization (ISO) to cut its 2022/23 global sugar production and sugar surplus estimates. The ISO 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.
Sugar prices have support from changing weather patterns that could undercut global sugar production. On May 11, the U.S. Climate Prediction Center raised the likelihood of an El Nino weather pattern emerging between August and October to 94% from the 74% forecast last month. If that El Nino pattern occurs, it could bring 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.
Larger sugar production in Brazil is expected after Conab on Apr 26 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.
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.
