On Thursday, sugar prices rose due to unfavorable global weather, resulting to a decline in grain productions.
Sugar futures for May delivery increased by 1.20% to $21.13 per pound on March 09’s Asian afternoon session.
The US Climate Prediction Center said the La Niña weather pattern halted, and the El Niño pattern may develop soon. If it occurs, drought in India and heavy rains in Brazil could occur, negatively affecting production.
Last Tuesday, prices increased to a six-year high as global supply issues stimulated fun buying of sucrose. However, the International Sugar Organization (ISO) still anticipates that the global 2022/23 production will jump by 4.80% year-on-year. It represents a record high of 180.40 million metric tons.
According to dealers, a decreasing outlook for production in India and issues with port congestion in Brazil are supportive factors.
Also, they added that some mills in Thailand are closing slightly earlier than normal amid lower-than-expected production.
Furthermore, costs gained support from concerns about smaller production in India. In addition, the Indian Sugar Mills Association (ISMA) said that the country is diverting grains to ethanol production. It will redirect 4.50 to 5.00 MMT of the output in 2022/23.
Moreover, the European Association of Sugar Manufacturers estimated that the EU 2022/23 harvests would fall -7.00% YoY to 15.50 MMT. Besides, experts noted that reduced stockpiles are a beneficial price factor.
USDA Estimated a Lower Sugar Supply
The World Agricultural Supply and Demand Estimates (WASDE) report altered the February US and Mexican sugar supply forecasts. Also, it raised its utilization forecast, causing tighter stocks in 2022/23.
In line with expectations, the period’s output in Mexico decreased from February while exports and ending stocks lowered.
So far, sugar yields continue to be far below average. Moreover, sucrose recoveries could have been better. However, they are slowly rebounding.
Additionally, the US Department of Agriculture expected Mexico’s local sugar use at 4,438,000 tons, down 222,000 tons from February. Likewise, exports were 1,121,278 tons, which is 147,000 tons lower.
Also, the USDA predicts weaker shipments to the IMMEX program and lower ending stocks.