Sugar prices faced downward pressure in Tuesday’s trading session, with the July NY world sugar #11 (SBN24) closing down by -0.06 (-0.32%) and Aug London ICE white sugar #5 (SWQ24) down by -1.90 (-0.35%).
The decline in prices follows recent reports indicating a robust increase in Brazil’s sugar production for the 2024/25 crop year. According to data from Unica, Brazilian sugar output through May surged by +11.8% year-on-year to 7.837 million metric tons (MMT), with a notable rise in the percentage of sugarcane crushed for sugar, climbing from 46.68% to 47.88% compared to the previous year.
Compounding the bearish sentiment, the Brazilian real fell to a 17-month low against the US dollar on Tuesday, prompting increased export selling from Brazilian producers. However, prices saw a recovery from intraday lows after short covering was triggered following reports of below-average rainfall in India during the monsoon season, according to the Indian Meteorology Department.
Earlier last week, sugar prices had reached one-month highs on concerns over reduced exports from India. The Indian government’s commitment to boosting ethanol blending with gasoline could potentially limit sugar availability for exports, thus tightening global supplies.
Supporting bullish sentiment, the International Sugar Organization (ISO) revised its global 2023/24 sugar deficit estimate significantly upward to -2.95 MMT, citing increased consumption projections primarily driven by revisions in India’s figures.
In a separate report, the Indian Sugar and Bioenergy Manufacturers Association indicated a slight decline of -1.6% year-on-year in India’s sugar production for the 2023/24 season, attributing this to the closure of more sugar mills compared to the previous year.
Looking ahead, India’s Meteorological Department forecasted favorable monsoon conditions, potentially improving the outlook for the country’s sugar crop after a challenging previous season marked by below-average rainfall.
Additionally, concerns over weather conditions in Thailand, the world’s third-largest sugar producer, have emerged. Record-high temperatures and below-average rainfall coupled with the El Nino weather pattern have raised worries about crop yields in the region, impacting global supply dynamics.
Despite these fluctuations, the USDA projected a record global sugar production of 183.461 MMT for the 2023/24 season, with a corresponding increase in global consumption to 178.431 MMT. Ending stocks are forecasted to decline to a 13-year low of 33.681 MMT, reflecting tight market conditions going forward.
The International Sugar Organization (ISO) had previously raised its 2023/24 global sugar deficit estimate, further highlighting the supply challenges facing the market amidst varied global production dynamics.
Conclusion
The global sugar market continues to navigate through a complex landscape influenced by production trends in key regions, weather uncertainties, and shifting demand patterns. Investors and stakeholders remain vigilant as they assess the implications of these developments on future price movements and market stability.
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