May NY world sugar #11 (SBK23) on Friday closed up +0.06 (+0.25%), and May London white sugar #5 (SWK23) closed down -7.20 (-1.04%).
Sugar prices Friday settled mixed. London sugar erased early gains and closed lower as deliveries of the May London sugar contract that expired Friday were smaller than expected, indicating weaker demand. Expectations were for delivery of at least 500,000 MT of sugar, but actual deliveries against the May London sugar futures contract only totaled 242,550 MT.
An increase in Brazil's sugar output is negative for sugar prices after Unica on Wednesday reported that Brazil's 2022/23 sugar production from Oct through March rose +5.2% y/y to 33.728 MMT.
Signs of even tighter global supplies have prompted fund buying of sugar futures over the past two weeks to an 11-year high on Wednesday. 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. Also, the Indian Sugar Mills Association (ISMA) reported India's Oct-Mar sugar production fell -3.3% y/y to 29.96 MMT last Wednesday. 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 Thursday 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.
Sugar prices have underlying support from concern about smaller sugar production in India. The ISMA on Jan 31 cut its 2022/23 India sugar production estimate to 34 MMT from an Oct estimate of 36.5 MMT and 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.
Reduced sugar production in Europe is a supportive factor for sugar prices. The European Association of Sugar Manufacturers on Dec 8 forecasted that EU 2022/23 sugar output would fall -7% y/y to 15.5 MMT.
Tighter global sugar supplies are bullish for prices. The International Sugar Organization (ISO) on Feb 24 raised its 2021/22 global sugar deficit estimate to -2.25 MMT from a November estimate of -1.67 MMT and cut its 2022/23 global sugar surplus estimate to 4.15 MMT from 6.19 MMT. However, the ISO still projects that global 2022/23 sugar production will climb +4.8% y/y to a record high of 180.4 MMT. Tropical Research Services March 28 cut its 2022/23 global sugar estimate to 1.6 MMT from a previous estimate of 4.5 MMT. Also, S&P Global Commodity Insights last Monday cut its 2022/23 global sugar surplus estimate to 600,000 MT from a November estimate of 5 MMT due to weaker-than-expected global sugar production.
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.
