What factors are contributing to the recent fall in sugar prices? Sugar prices are declining due to a significant increase in Brazil’s sugar production, as reported by StoneX, which raised the global sugar surplus estimate for the 2023/24 season, coupled with other global production concerns that could affect market balance.
Sugar prices have dipped on the heels of robust production figures emerging from Brazil, stirring the global sugar markets. On Monday, March NY world sugar and London ICE white sugar both closed with losses, reflecting a response to updated production estimates and fluctuating global output.
Fueling the downward price trend, analytics firm StoneX recently revised its 2023/24 global sugar surplus estimate upward to 3.4 million metric tons (MMT) from an earlier projection of 730,000 metric tons. The increase is attributed to an uptick in Brazil’s sugar production, which saw a dramatic year-over-year rise of 148.6% in the first half of January alone, according to Unica.
Further weighing in on the market, more of Brazil’s sugarcane is being allocated for sugar rather than ethanol production compared to the previous year. This shift amplifies the pressure on sugar prices, as 49.06% of cane was crushed for sugar up to mid-January in the 2023/24 crop year, marking an increase from 45.95% last year.
Conversely, not all global projections point to an abundance of sugar. The Thai Sugar Millers Corp recently reduced the upper limit of their 2023/24 sugar production forecast for Thailand, another significant sugar producer. This reduction is due in part to severe drought conditions, which may also be exacerbated by the current El Nino weather system that typically brings dryness to sugar crops in Asia.
India, the second-largest sugar producer worldwide, is also experiencing a reduction in production. The Indian Sugar Mills Association reported a decline of 3.2% in sugar output from October to January compared to the previous year, prompting the country to extend restrictions on sugar exports to preserve domestic supplies.
The complex dynamics of sugar production and trade are further complicated by India’s recent announcement of a 50% export tax on molasses, a by-product of sugar refining. This move suggests that India’s ban on sugar exports may endure, potentially keeping global supplies tight.
Looking at longer-term predictions, the USDA forecasts an increase in both global sugar production and consumption for the 2023/24 season, while the International Sugar Organization anticipates a global sugar deficit, painting a mixed picture of the future sugar market balance.
As investors and market watchers assess the impact of these varied factors, the sugar market remains sensitive to both the immediate shifts in production and the longer-term climatic patterns that could influence supply. The balance between excess and deficiency will continue to shape the sweet commodity’s journey on the global stage.
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