Analysis of Recent Trends Impacting Sugar Prices
Recently, sugar prices have declined due to favorable rain forecasts in Brazil and a weakening Brazilian real. Despite some production increases anticipated from Brazil and Thailand, overall projections suggest a tightening sugar market amid varying forecasts from global producers.
Sugar prices have seen a decline, with May New York world sugar down by 0.79%, and May London ICE white sugar down by 0.35%. This downturn is attributed to forecasted rain in Brazil, alleviating concerns of dry weather impacting sugar production. Meteorologist Climatempo predicts widespread rainfall for Brazil’s sugar-growing regions extending into the following week.
The Brazilian real has also depreciated, reaching a two-week low which further pressures sugar prices. A weaker real incentivizes Brazilian sugar producers to increase their export activities. Last week, sugar prices hit monthly and four-month highs because of indications of reduced global sugar production, contrasting with current market conditions.
The Indian Sugar and Bio-energy Manufacturers Association has reduced its sugar production forecast for 2024/25 to 26.4 million metric tons (MMT), down from 27.27 MMT due to lower cane yields. Additionally, Unica reported a 5.3% year-over-year decrease in cumulative Brazil Center-South sugar output through mid-March, totaling 39.983 MMT.
On March 6, the International Sugar Organization raised its forecast for the global sugar deficit in 2024/25 to 4.88 MMT, indicating a tightening market following the previous year’s surplus of 1.31 MMT. Their lowered forecast for global sugar production stands at 175.5 MMT, down from 179.1 MMT.
Despite the bearish trends, Datagro forecasts a potential increase in Brazilian sugar production by 6% in 2025/26, estimating it will reach 42.4 MMT. Contrarily, projections by Green Pool Commodity Specialists suggest a return to a surplus in the worldwide sugar market in 2025/26, contrasting earlier deficit expectations.
The Indian government’s recent decision to permit the export of 1 MMT of sugar lessens previous restrictions, which had been in place since October 2023. The India Sugar Mills Association estimates a significant drop in sugar production for 2024/25, projecting a 17.5% decrease.
Thailand is also forecasting an increase in sugar production for 2024/25 of 18% year-over-year to 10.35 MMT, which presents additional bearish pressure given its status as a significant sugar producer and exporter.
Brazil has faced challenges from drought and heat in prior seasons, severely impacting sugar crops, particularly in Sao Paulo. This along with Conab’s reduction of the 2024/25 production estimate to 44 MMT illustrates the volatile conditions affecting Brazilian sugar yield.
In summary, sugar prices have experienced a recent downturn influenced by favorable rain forecasts in Brazil and the depreciation of the Brazilian real, both of which stimulate export activities. While some projections indicate potential increases in production from Brazil and Thailand, reductions in sugar output forecasts from India and decreasing global supply contribute to market uncertainty. The evolving dynamics of global sugar production and consumption remain pivotal for future price movements.
Original Source: www.tradingview.com
