Sugar Market Analysis: Price Movements and Global Production Trends
On Thursday, sugar markets reflected a slight upward trend with May NY sugar #11 (SBK25) increasing by +0.07 (+0.39%) and August London ICE white sugar #5 (SWQ25) rising by +1.60 (+0.32%). This positive momentum follows reports from India’s sugar industry, indicating a reduction in sugar production for the current season.
According to the Indian Sugar and Bio-Energy Manufacturers Association (ISMA), sugar production from October 1 to April 15 in India reached 25.5 million metric tons (MMT), marking a decline of 18% compared to the same timeframe last year. This news has contributed to the upward price movements in the sugar markets.
Additionally, the recent surge of +3% in WTI crude oil (CLK25) to reach a 1.5-week high has bullish implications for sugar prices. The increase in crude oil prices tends to benefit ethanol prices, which may result in sugar mills prioritizing ethanol production over sugar, resulting in tighter sugar supplies.
Interestingly, sugar prices have faced challenges earlier in the week, as NY sugar reached its lowest future price in two and a half years, while London sugar has hit a near three-month low. This downward pressure is somewhat mitigated by forecasts of plentiful rainfall in India, which could lead to a significant boost in sugar crop yields. The Indian Ministry of Earth Sciences anticipates an above-normal monsoon for the current year, estimating total rainfall at 105% of the long-term average, with the monsoon season extending from June to September.
Concerns about the ongoing global trade conflict further cloud the outlook for sugar prices, as apprehensions arise that tariffs will hamper economic growth and reduce consumer demand through higher sugar prices.
On another note, a forecast by consultant Datagro has projected that sugar production in Brazil’s Center-South region will rise by 6% year-on-year, reaching an estimated 42.4 MMT for the 2025/26 period. Meanwhile, Green Pool Commodity Specialists have indicated that the global sugar market might shift from a deficit of 3.7 MMT in 2024/25 to a surplus of 2.7 MMT in 2025/26.
India’s sugar export policy is also influential in shaping market dynamics. The Indian government announced it would permit sugar mills to export 1 MMT of sugar this season, easing previous restrictions on sugar exports. This shift comes after the nation enforced limits since October 2023 to secure adequate domestic supplies. In the 2022/23 season, Indian exports were restricted to 6.1 MMT after a record high of 11.1 MMT in the previous season. Despite this, ISMA has projected a significant drop in India’s sugar production for the 2024/25 season, predicting a 17.5% decrease to 26.4 MMT, marking the lowest production level in five years.
The outlook for increased sugar production in Thailand adds another layer of complexity to global sugar prices. Projections show Thailand’s production for the 2024/25 season may rise 18% to reach 10.35 MMT, up from 8.77 MMT in the previous season. Thailand holds the position of the world’s third-largest sugar producer and the second-largest exporter.
Nonetheless, some signs of reduced global sugar production are helping to stabilize prices. Recent data from Unica indicated that sugar output in Brazil’s Center-South for the 2024/25 season fell by 5.3% year-on-year to 40.169 MMT. Similarly, the ISMA has revised its sugar production forecast for India down to 26.4 MMT, reflecting lower cane yields.
On a global scale, the International Sugar Organization (ISO) has adjusted its 2024/25 sugar deficit forecast, now estimating a shortage of 4.88 MMT, up from an earlier projection of 2.51 MMT. This adjustment reflects tightening market conditions following a surplus of 1.31 MMT in the previous year. Furthermore, the ISO has lowered its production forecast for 2024/25 to 175.5 MMT from 179.1 MMT.
Drought conditions and extreme heat have wreaked havoc on sugar crops in Brazil, notably in the country’s leading sugar-producing state, Sao Paulo. Recent evaluations suggest that fires might have led to the loss of up to 5 MMT of sugar cane. The Brazilian government’s crop forecasting agency, Conab, has predicted a 3.4% decline in Brazil’s sugar production for the 2024/25 season, estimating it to be 44.118 MMT due to adverse weather conditions.
In summary, the interplay of weather patterns, government policies, and global market dynamics continues to shape the sugar market landscape, highlighting the need for stakeholders to stay attuned to these evolving factors.
