July NY world sugar #11 (SBN23) on Wednesday closed up +0.47 (+1.79%), and Aug London white sugar #5 (SWQ23) closed up +9.10 (+1.28%).
Sugar prices Wednesday climbed to 1-1/2 week highs and closed moderately higher. A weaker dollar Wednesday was supportive of sugar prices along with concerns about lower global sugar production.
Sugar prices have support from speculation that lower-than-expected sugar production in India will prompt the government to curb sugar exports. 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.
Sugar has support from concerns that changing weather patterns could undercut global sugar production. The U.S. Climate Prediction Center on Apr 20 raised the likelihood of an El Nino weather pattern emerging between August and October to 74% from 61% a month ago. 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.
The outlook for a sugar surplus this year is negative for sugar prices. The International Sugar Organization (ISO) said last Thursday that it expects the global 2023/24 sugar surplus to fall to +2.1 MMT from a +4.15 MMT surplus in 2022/23. |ISO is projecting that global 2022/23 sugar production will climb +4.8% y/y to a record high of 180.4 MMT. Larger sugar production 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.
