Quick Look:
- Sugar prices hit a 1.5-month low due to forecasts of a global surplus.
- Brazil’s sugar production rose 15.7% YoY to 14.2 MMT, boosting global surplus.
- India’s surplus of 3.6 MMT prompts calls to lift export restrictions.
- India’s below-normal rains and Thailand’s heatwave could affect yields.
In a surprising twist for the sugar market, prices tumbled to their lowest in one and a half months by Friday. This decline comes on the heels of forecasts predicting a global sugar surplus. Covrig Analytics recently adjusted its 2024/25 global sugar market projections from a deficit of 2.6 million metric tonnes (MMT) to a surplus of 182,000 metric tonnes. This shift has sent ripples through the market, prompting a closer look at the factors driving this bearish outlook.
Brazil’s Booming Sugar Production
Brazil, the world’s leading sugar producer, has played a significant role in this price downturn. Unica, an essential industry body, reported that the country’s production for the 2024/25 crop year up to June surged by 15.7% year-over-year, reaching 14.2 MMT. Additionally, the proportion of Brazil’s cane crop processed for sugar increased to 48.72%, up from 47.69% the previous year. This robust output has further contributed to the mounting global surplus, exerting downward pressure on prices.
India’s Surplus and Export Policies
Adding to the global surplus narrative, India, the second-largest sugar producer, has also reported significant reserves. The Indian Sugar and Bio-energy Manufacturers Association (ISM) revealed that India’s reserves for 2023/24 stood at 9.1 MMT, with a surplus of 3.6 (MMT). This surplus has led to calls for the government to lift restrictions on sugar exports, which have been in place since October 2023 to ensure domestic supply. India allowed limited exports of 6.1 (MMT) during the 2022/23 season, a stark contrast to the record 11.1 (MMT) exported the previous season.
Weather Woes in India and Thailand
While the surplus looms, weather conditions in key producing regions provide a mixed bag for sugar prices. In India, below-normal monsoon rains have lent some support to prices. The Indian Meteorological Department reported a 2% deficit in rainfall compared to the long-term average, which could impact crop yields. Conversely, Thailand, the world’s third-largest sugar producer, has experienced record heat, potentially damaging sugarcane crops. The Thai Meteorological Department noted that over three dozen provinces posted record-high temperatures in April, impacting cane yields.
Global Production Forecasts and Impact
Brazil’s future production prospects remain bullish. Conab, Brazil’s crop agency, projects a 1.3% year-over-year increase in sugar production for the 2024/25 marketing year, setting a new record of 46.292 MMT. This projection includes a 4.1% increase in sugar acreage, reaching 8.7 million hectares, the most in seven years. For the recently concluded 2023/24 marketing year, Unica reported a 25.7% year-over-year rise in Brazilian sugar output, hitting 42.425 MMT.
International Market Dynamics
The International Sugar Organization (ISO) has also weighed in, raising its global 2023/24 sugar deficit estimate to 2.95 MMT from an earlier projection of 689,000 metric tonnes. This adjustment stems from increased consumption figures in India. Meanwhile, the USDA’s bi-annual report projects a 1.4% year-over-year rise in global sugar production for 2024/25, reaching a record 186.024 MMT. Human sugar consumption is also expected to climb by 0.8% year-over-year, hitting a record 178.788 MMT. However, global sugar ending stocks are forecasted to fall by 4.7% year-over-year to a 13-year low of 38.339 MMT.
Global Production to Hit Record 186.024 MMT
The sugar market is currently experiencing a complex interplay of factors driving prices lower. Robust production in Brazil, significant reserves in India, and the prospect of increased global output contribute to the surplus outlook. At the same time, weather-related challenges in major producing regions support prices. As the market navigates these dynamics, stakeholders will watch for any shifts in production, consumption, and export policies that could influence the delicate balance of supply and demand.