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Sugar Prices Climb High On 12th Of May, 2023

Published Date: May 16, 2023

On the 12th of May, the July NY world sugar #11 (SBN23) closed higher at +0.20 (+0.77%) while the Aug London white sugar #5 (SWQ23) also closed higher at +9.80 (+1.39%). Sugar prices rose moderately on the 12th. Sugar prices rose as the Brazilian real (USDBRL) rose to a three-week high against the dollar on the 12th of May. 

Rise In Sugar Pricing 

Concerns that shifting weather patterns might reduce global sugar production caused sugar to move higher on the 12th. The likelihood of an El Nino weather pattern forming between August and October was increased by the U.S. Climate Prediction Center on 11th May from 75% to 94%. If that El Nino pattern materializes, it might cause drought in India and heavy rains in Brazil, which would be detrimental to the growth of the sugarcane crop. The last time El Nino affected sugar crops in Asia was in 2015 and 2016, leading to a price spike. 

India’s Sugar Production And Exports

On the expectation of tighter global supplies, sugar prices rose to 11-year highs in the previous month. India is the world's second-largest sugar producer. The Indian Sugar Mills Association (ISMA) reduced its projection for India's sugar production in 2022–2023 from 34 MMT to 32.8 MMT on April 26. Due to lower-than-anticipated sugar production, India's food secretary stated that the country might not permit additional sugar exports this year. India only allowed 6 MMT of sugar exports in 2022–2023 compared to 11.2 MMT in 2021/22, a -46% year-over-year decrease. The ISMA decreased its estimate for sugar exports from India in 2022–2023 from 9 MMT in October to 6.1 MMT on January 31. Additionally, the ISMA predicted that by 2022 or 2023, sugar mills in India will divert 4.5 to 5.0 MMT of sugar to ethanol production. 

Factors Affecting the Global Sugar Price Increase

Sugar prices will decline as the harvest progresses more quickly in Brazil. According to a report published by Unica on May 11th, Brazil's sugar production from 2023–2024 through April was up +43.7% y/y at 1.531 MMT. The amount of sugarcane that was crushed to make sugar increased from 35.3% last year to 41.6% this year. 

A sugar surplus is predicted for this year, which is bad news for sugar prices. The International Sugar Organization (ISO) announced on the 11th of May that it anticipates a decline in the global sugar surplus from +4.15 MMT in 2022–2023 to +2.1 MMT in 2023–2024. According to ISO, global sugar production will reach a record high of 180.4 MMT in 2022–2023, up +4.8% year over year. In light of Conab's prediction that Brazil's 2023–24 sugar output would increase +4.7% y/y to 38.8 MMT, the second-highest level ever, as crops recover from the unfavorable weather of the previous season, there is an expectation for increased sugar production. This prediction was made on April 26. 

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