Sugar Prices Recover to 1-1/2 Week High

May NY world sugar #11 (SBK24) today is up +0.74 (+3.50%), and May London ICE white sugar #5 (SWK24) is up +19.90 (+3.33%).

Sugar prices today rallied to a 1-1/2 week high on some short-covering after last week's 2-month low.

Sugar prices last week showed weakness on rain in Brazil.  Sugar prices also showed weakness on rising sugar production in Brazil, the world's largest producer.  Unica on Feb 27 reported that Brazil's Center-South sugar output surged +1051% y/y in the first half of February to 27,000 MT and that sugar output in the 2023/24 crop year through mid-February rose +25.6% y/y to 42.158 MMT.  Meanwhile, more sugarcane is being crushed for sugar than ethanol, as 49.04% of cane was crushed in the 2023/24 crop year through mid-February for sugar production compared to 45.95% last year.

In a supportive factor, the International Sugar Organization (ISO) on Feb 28 raised its 2023/24 global sugar deficit estimate to -689,000 MT from a November estimate of -335,000 MT.  

Reduced sugar production in India is a bullish factor.  The Indian Sugar Mills Association (ISMA) reported last Monday that India's 2023/24 sugar output from Oct through Feb fell -1.4% y/y to 25.5 MMT.   For the full marketing year, ISMA forecasts India's 2023/24 sugar production at 33.05 MMT, down -9.7% from 36.6 MMT in 2022/23.  India's Weather Department said this year's monsoon rain (Jun-Sep) was 6% below average, the poorest monsoon rainfall in 5 years.  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 allowing exports of a record 11.1 MMT in the previous season.  India is the second-largest sugar producer in the world.  

Sugar prices are also seeing support from signs that India's ban on sugar exports will be maintained and global supplies will remain tight after India recently announced a 50% export tax on molasses from sugar refining.  That reduces the likelihood that India will lift its sugar export curbs in the foreseeable future.  On Wednesday, sugar trader Alvean said that India's 2024/25 sugar output may drop by -9% to 30 MMT, which will likely keep restrictions on India's sugar exports in place and curb global supplies.

Reduced Thai sugar production is bullish for sugar prices after the Thai Sugar Millers Corp on Feb 6 projected that Thailand's 2023/24 sugar production would fall by -32% y/y to a 17-year low of 7.5 MMT due to a severe drought.  Rainfall in Thailand has been below the same period last year, and the current El Nino weather system could continue to depress rainfall in Thailand.  Sugar millers in Thailand are reporting the lowest yield from crushed cane this year in at least 13 years.  Thailand is the world's third-largest sugar producer and the second-largest sugar exporter.

Sugar prices are seeing support from this year's El Nino weather event.  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. 

More Sugar News from Barchart

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.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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