On Monday, raw sugar futures hit their highest level in six years amid tight supply worries on India’s weak production outlook.
The price of US sugar #11 contracts rose by 1.15% to $0.21 per pound, hitting the highest level since 2017. Likewise, the London futures increased by 1.125 to $0.30 per pound, reaching a one-month high.
According to India’s National Federation of Cooperative Sugar Factories, the country’s crop production in 2022/23 would decline by 4.50% year-over-year to 34.30 million metric tons. Besides, the nation’s food secretary said it would assess domestic demand before deciding whether to allow more exports next month.
Meanwhile, mills in Maharashtra, the top-producing state of the world’s second-largest sugar exporter, would stop cane crushing 45 to 60 days earlier than last year. The decision was made as heavy rain curtailed cane availability. The region’s western state, accounting for over a third of the country’s sugar output, could produce 12.80 million tons. This latest projection is lower than an earlier forecast of 13.80 million tonnes.
Due to this, analysts believe that India’s weak sugar output could prevent it from allowing additional exports. Hence, it would further support prices and permit rivals Brazil and Thailand to increase their shipments.
Europe’s Sugar Output Could Plummet
Likewise, the European Association of Sugar Manufacturers forecasted that the region’s production could plunge by 7.00% YoY to 15.50 MMT. Thus, it could prompt food producers to import, which could lead to tighter global supplies.
Meanwhile, the world’s largest sugar exporter, Brazil, could boost ethanol production at the expense of the commodity. It is due to Petrobras, the nation’s state-owned oil company, raising gasoline prices by over 7.00%, supporting ethanol prices.
In addition, the government of Thailand announced that the sugar harvest would be delayed. Hence, the country’s anticipated exports of 1.00 MMT to 2.00 MMT this quarter will not materialize.