Weakness in the Brazilian Real Impacts Sugar Prices
Sugar prices hit new lows due to a weak Brazilian Real and reduced production forecasts. The ISO projects a global sugar deficit of -4.88 MMT for 2024/25, compounded by India’s production decline and adverse weather in Brazil. Conversely, Thailand’s expected production increase may exert further downward pressure on sugar prices. Mixed signals are evident, with USDA forecasts indicating robust global consumption and yearly production growth.
On May 2024, world sugar prices fell sharply, with May NY world sugar 11 (SBK25) declining by 3.37%, reaching new lows as a result of a weakened Brazilian Real. The International Sugar Organization (ISO) raised its forecast for the 2024/25 global sugar deficit to -4.88 million metric tons (MMT), indicating a shift from the previous year’s surplus. Additionally, the ISO lowered its production estimate to 175.5 MMT from an earlier projection of 179.1 MMT, further tightening market conditions.
Sugar prices had surged to a new high earlier in February due to a strong Brazilian Real discouraging exports and significant short-covering in futures. Support for prices came from a report indicating a 12% year-on-year decrease in India’s sugar production to 19.7 MMT for the current marketing year. The delayed sugar harvest in Brazil, as reported by Alvean, may negatively impact production due to insufficient rainfall.
Despite tight supply concerns in Brazil, India announced plans to export 1 MMT of sugar this season, relaxing previous restrictions imposed to ensure ample domestic supply. The Indian Sugar Mills Association projects that India’s production will decline by 15% year-on-year to a five-year low of 27.27 MMT for the 2024/25 season. Meanwhile, Thailand anticipates an 18% increase in production, which could further put downward pressure on sugar prices.
Brazil suffered from drought conditions and excessive heat that led to crop damage, particularly in São Paulo, which could result in a loss of up to 5 MMT of sugarcane. Brazil’s government crop forecasting agency, Conab, revised its sugar production estimates downward to 44 MMT, attributing this to lower yields. Recent reports indicated that the cumulative sugar output through mid-February had fallen 5.6% to 39.812 MMT compared to the previous year.
The USDA forecast for global sugar production in 2024/25 anticipates a record high of 186.619 MMT, while human sugar consumption is projected to rise to 179.63 MMT. The USDA expects a decline in global sugar ending stocks by 6.1% year-on-year to 45.427 MMT. Despite challenges in production, these forecasts suggest a robust consumption landscape moving forward.
Current market conditions for sugar are beleaguered by a weakened Brazilian Real and expected declines in production due to adverse weather conditions. Although India is easing export restrictions, Thailand’s forecasted increase in production adds bearish pressure on prices. The USDA’s optimistic projections for global sugar production and consumption provide a complicated backdrop for sugar market dynamics in 2024 and beyond.
Original Source: www.tradingview.com