On Friday, sugar prices rose in the international markets, linked to the US Climate Prediction Center’s announcement.
Sugar futures for July export went up by 1.22% to $25.79 per pound on June 09’s Asian afternoon session.
The El Niño weather pattern brought floods to Brazil and reduced rainfall in India, which are top-producing countries. This issue in temperature led to a surge in other commodities like soybeans, coffee, and cocoa. Weather concerns in the areas greatly encouraged market sentiment.
Moreover, the Indian Sugar Mills Association (ISMA) revised the 2022/23 market output estimates. As a result, it dropped to a lower figure of 32.80 million tons while export numbers also decreased. Nonetheless, it indicated a balanced market since opening stock levels almost matched the government’s expected level.
According to the International Sugar Organization, the global output forecast for the 2022/23 period stood at 177.40 million tons. Impressively, the estimated surplus is projected to be lower than the earlier prediction of 2.50 to 4.50 million tons. Therefore, the change in surplus forecasts was a good sign for international markets.
Overall, the outlook for sugar prices seems to be changing. If the current weather pattern hints toward the presence of El Niño, other soft commodities may follow. The favorable price movement is considered an early indicator of the market movement.
Weather Concerns Pulled Up Sugar Prices
Weather issues like the higher sea surface temperatures caused wind patterns to change. This led to negative impacts on sugar production.
Due to smaller global supplies, the commodity’s prices rallied to 11-year highs in April. Its 2022/23 Indian sugar production was cut. According to India’s Food Secretary, the country might not enable further crop exports this year amid weaker-than-expected production.
In addition, India only allowed 6.00 MMT of product exports after letting 11.20 MMT in 2021/22. This equates to a -46.00% decline year-on-year.
Furthermore, the ISMA reduced the sugar export estimate to 6.10 MMT, lower than the 9.00 MMT from October. Besides, India is the world’s second top sweetener producer.