March NY world sugar #11 (SBH24) on Thursday closed up +0.35 (+1.63%), and March London ICE white sugar #5 (SWH24) closed up +9.80 (+1.60%).
Sugar prices on Thursday recovered from early losses and closed higher as strength in the Brazilian real sparked short covering in sugar futures. On Thursday, the real (^USDBRL) rallied to a 1-week high against the dollar, discouraging export selling from Brazil's sugar producers.
Long liquidation pressures have weighed on sugar prices as last Friday's Weekly Commitment of Traders (COT) report showed money managers reduced their net-long London ICE sugar positions to a 22-month low of 9,534 for the week ending Jan 2.
Sugar prices have recently been undercut by higher Brazil sugar production. On Thursday, Unica reported Brazil's Center-South sugar output jumped +35.6% y/y in the second half of December to 236,000 MT and that sugar output in the 2023/24 crop year through December rose +25.4% y/y to 42.053 MMT. Meanwhile, Brazil exported 3.7 MMT of sugar in November, marking a new record for the month.
A negative factor for sugar was the recent news that India's food ministry directed local sugar mills to stop using sugar cane juice and syrup to produce ethanol in the 2023/24 supply year to boost sugar reserves. Green Pool Commodity Specialists said this could add 2 MMT of sugar to India's domestic supplies.
Reduced sugar production in India is a bullish factor. India's Weather Department said this year's monsoon rain (Jun-Sep) was 6% below average, the poorest monsoon rainfall in 5 years. The Indian Sugar Mills Association (ISMA) reported Monday that India's 2023/24 sugar production from Oct 1-Dec 31 fell -7.6% y/y to 11.2 MMT. For the full marketing year, ISMA forecasts India's 2023/24 sugar production at 32.5 MMT, down -11.2% from 36.6 MMT in 2022/23. In October, India extended restrictions on sugar exports from Oct 31 until further notice in an attempt to maintain adequate domestic supplies. India allowed mills to export only 6.1 MMT of sugar during the 2022/23 season to Sep 30 after letting them export a record 11.1 MMT in the previous season.
The Thai Sugar Millers Corp on Nov 1 projected that Thailand's 2023/24 sugar production would fall by -36% y/y to a 17-year low of 7 MMT due to a severe drought. 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 further reduce precipitation over the next two years. Thailand is the world's third-largest sugar producer and the second-largest sugar exporter.
A bullish factor for sugar is concern that an El Nino weather pattern could disrupt global sugar production. 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 Nov 23, projected that global 2023/24 sugar production would climb +4.7% y/y to a record 183.461 MMT and that global 2023/24 human sugar consumption would increase +1.2% y/y to a record 178.431 MMT. The USDA also forecasted that 2023/24 global sugar ending stocks would fall -13.3% y/y to a 13-year low of 33.681 MMT. Meanwhile, ISO on Aug 10 projected that 2023/24 global sugar production would fall -1.2% y/y to 174.8 MMT and that the global sugar market in 2023/24 will fall into a 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.
