Sugar Prices Drop as Brazilian Real Sinks on Market Caution

On Tuesday, sugar prices plummeted after the Brazilian real plunged to a 4-1/2-month low ahead of its central bank’s interest rate decision.

US sugar #11 futures for May delivery tumbled 2.71% to ¢21.56 per pound on March 19 as Brazilian produce flooded the market. Nevertheless, analysts anticipate a 0.37% gain to ¢21.64 a pound in the coming trading session.

Unica reported a year-over-year (YoY) increase of 16.00 million metric tons (MMT) in Brazil’s Center-South output in February’s second half. Moreover, the South American nation’s total output for the 2023/24 crop year jumped 26.00% YoY to 52.18 MMT.

In addition, the agency estimates that 28 sugar mills reopened in the first half of March following their off-season pause. Earlier in the month, cane farmers announced plans to increase their production capacity by 10.00% to exploit rising prices.

Meanwhile, the Indian Sugar Mills Association posted a 1.40% contraction in the world’s largest sugar producer’s output to 25.50 MMT. Regardless, the Indian Sugar and Bioenergy Manufacturers Association hiked its yield guidance by 2.90% from 33.05 MMT to 34.00 MMT.

Lastly, the Thai Sugar Millers Corp projected a 32.00% YoY slide in output to a 17-year low of 7.50 MMT. El Niño has devastated sugarcane farms in Thailand, the world’s third-largest sugar producer, with severe drought in the past few years.

Brazilian Real Depreciation Forces Sugar Exports

A worse-than-expected weakness in the Brazilian real against the US dollar triggered a long liquidation in sugar futures. According to commodity specialists, a considerable drop in the value of local currency encourages export selling by domestic producers.

Forex experts expect Banco Central do Brasil to cut its interest rate by 50.00 basis points during its Wednesday meeting. It would mark the seventh straight meeting that the central bank lowered its overnight rate, pressuring the national currency.

The US dollar vs the Brazilian real currency pair edged 0.10% higher to R$5.03 per greenback on Tuesday. With the real on a four-day losing streak, Brazilian farmers opted to sell their sugar stock abroad instead of domestically.

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