Sugar Prices Decline Amid Weaker Brazilian Real and Production Forecasts
Sugar prices have fallen for the third day, influenced by a weak Brazilian real, reaching a two-week low. Production forecasts indicate a potential global sugar deficit for 2024/25, while India’s production declines support prices. Meanwhile, Thailand’s expected production increase poses a bearish outlook, reflecting a complex global sugar market scenario.
Sugar prices have declined for the third consecutive day, reaching a two-week low as the Brazilian real weakens. May contracts for New York world sugar 11 dropped 2.38%, while May London ICE white sugar 5 fell by 1.70%. Market forecasts indicate a potential global sugar deficit of 4.88 million metric tons (MMT) for 2024/25, compared to an earlier forecast of 2.51 MMT, suggesting a tightening supply after a surplus of 1.31 MMT in 2023/24.
The International Sugar Organization (ISO) has also reduced its global sugar production forecast for 2024/25 to 175.5 MMT from 179.1 MMT previously. In contrast, Green Pool Commodity Specialists forecast a shift to a global surplus of 2.7 MMT in 2025/26, following a projected deficit of 3.7 MMT in 2024/25. This fluctuating market dynamic adds to the complexities sugar traders face.
Recently, sugar prices surged to a 2.5 month high, fueled by the Brazilian real’s strength against the dollar, which deterred sugar exports from Brazil. A significant drop in India’s sugar production by 14% year-on-year to 21.98 MMT has provided additional support to sugar prices, according to India’s Sugar and Bio-Energy Manufacturers Association.
Concerns persist over Brazil’s sugar production as insufficient rainfall has resulted in underdeveloped sugarcane in some regions. If dry conditions worsen, the upcoming harvest in April may be delayed, further impacting production. Additionally, while India has increased its allowed sugar exports, the Indian Sugar Mills Association anticipates a 15% reduction in production to a five-year low of 27.27 MMT for 2024/25.
Thailand’s projected 18% increase in sugar production to 10.35 MMT for 2024/25 presents a bearish outlook for sugar prices. The country is a key global player, being the third-largest producer and second-largest exporter. In Brazil, drought and heat have already led to crop damage, prompting downward revisions in sugar production estimates to 44 MMT from a previous forecast of 46 MMT due to lower sugarcane yields.
In summary, global sugar production is projected to increase by 1.5% year-on-year to 186.619 MMT, while consumption is forecasted to rise by 1.2% to a record 179.63 MMT for the 2024/25 period. Furthermore, ending stocks for 2024/25 are expected to decline by 6.1% to 45.427 MMT, indicating changes in the global sugar market landscape.
The recent decline in sugar prices, largely driven by a weakening Brazilian real, reflects fundamental shifts in global supply and demand. Expectations of a tightening sugar market with forecasts of production deficits and low output in critical regions such as India and Brazil highlight the complexities facing producers and traders alike. With further projections indicating potential surpluses elsewhere, the sugar market remains volatile and requires close observation.
Original Source: www.tradingview.com
