On Thursday, the October NY world sugar #11 (SBV24) closed up +0.77 (+3.64%), while the December London ICE white sugar #5 (SWZ24) closed up +13.10 (+2.36%).

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Brazil’s Impact on Sugar Prices

On Thursday, sugar prices extended the week's sharp incline, with NY sugar posting a 5-1/4 month high and London sugar posting a 2-month high. Sugar prices are soaring as drought threatens Brazil's sugarcane crops. Fund purchases this week support sugar prices after meteorologist Climatempo predicted hot and dry weather in Brazil's sugar-producing regions until next week.  

Due to fire and drought damage, Czarnikow reduced its estimate of sugar production for Brazil's Center-South for 2024–2025 from 40.0 MMT to 39.2 MMT last Tuesday. Furthermore, Covrig Analytics increased its estimate of the global sugar deficit for 2024–2025 last Tuesday from -300,000 MT to -600,000 MT.

The Brazilian real (^USDBRL), which rose to a one-month high against the dollar on Thursday, is another sign of strength for sugar prices. The Brazilian sugar producers' export sales are hindered by the stronger real.

Since last Thursday, when Unica revealed that Center-South sugar production dropped 6.0% year over year to 3.258 MMT in the second half of August, sugar has continued to receive support. 

In August of 2024–25, however, sugar production increased by 3.9% year over year to 27.169 MMT.

The International Sugar Organization (ISO) on August 30 predicted a global sugar deficit of -3.58 MMT for 2024–2025—a significant increase over the projected deficit of -200,000 MT for 2023–2024 and a factor supporting sugar prices. The ISO projects that global sugar production will reach 179.3 MMT in 2024–2025, down 1.1% year over year from 181.3 MMT in 2023–2024.    

On August 22, Conab, the Brazilian government's crop forecasting organization, reduced its estimate of sugar production in the Brazil Center South for 2024–2025 from 42.7 MMT to 42 MMT. The reason given was lower sugarcane yields because of the drought and excessive heat.

Sugar Production in India and Thailand

The Food Ministry of India on August 30 removed limitations on sugar mills manufacturing ethanol for the 2024–2025 year, which begins in November, potentially extending India’s sugar export bans. This is another factor driving up sugar prices. In order to maintain sufficient domestic supplies, India has restricted sugar exports since October 2023. After allowing mills to export a record 11.1 MMT of sugar the previous season, India only permitted mills to export 6.1 MMT of sugar until September 30.  

The belief that above-average monsoon rains in India will result in a bumper crop of sugar is a bearish factor for sugar prices. As of September 16, India had received 862.3 mm of rain during the current monsoon season, according to a report released on Monday by the Indian Meteorological Department. This is 8% more than the equivalent long-term average of 801.5 mm.

On July 3, the Indian Sugar and Bio-energy Manufacturers Association (ISM) declared a 3.6 MMT surplus and 9.1 MMT of sugar reserves for 2023–2024. 

India's 2023–24 sugar production from October to April decreased 1.6% year over year to 31.4 MMT, according to a separate report published by the ISM on May 13.  Furthermore, the ISM predicted on July 30 that India's sugar production in 2024–2025 would drop to 33.31 MMT, a -2% year-over-year decline.  

 Thailand is the second-biggest sugar exporter and the third-largest sugar producer in the world. Thailand's record heat wave, which could harm the nation's sugarcane crops, is encouraging for sugar prices. This year's crushed cane yield in Thailand is the lowest in at least 13 years, according to sugar millers.  On the other hand, the Thai government estimated on April 22 that the country produced 8.77 MMT of sugar in 2023–2024 from December to April 17. This estimate was higher than the 7.5 MMT Thai Sugar Millers Corp. had estimated in February.

According to the USDA's bi-annual report, which was made public on May 23, global sugar production is expected to reach a record high of 186.024 MMT in 2024–25, up 1.4% year over year, while global human sugar consumption is expected to rise to a record high of 178.788 MMT, up 0.8% year over year. 

According to USDA projections, global sugar ending stocks in 2024–2025 would drop 4.7% year over year to 38.339 MMT, a 13-year low.  

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REFERENCE- barchart.com

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