On Wednesday, sugar prices went up amid dry favorable weather conditions, boosting the crop harvest in Brazil.
Sugar futures for October delivery rose by 0.47% to $23.63 per pound on July 12’s Asian afternoon session.
Forecasts of good weather in Brazil limited the chances for harmful frost and gave way to a speedier harvest. Also, the temperature improvement led to a rise in Czarnikow’s 2023 Center-South production to 38.20 MMT.
The commodity gained support from severe dryness in Thailand, the top third producer. Its extreme dryness may negatively impact its volumes.
This year, Thailand received 28.00% of rainfall, lower than the same period from last year. Additionally, the beginning of the El Niño weather pattern could lower precipitation more for the following two years.
The Czarnikow Group speculates that Thai sugar production to drop this year for the first time in three years. It would mark as its second lowest level since 2009/10.
Furthermore, its costs benefitted from the possible disruptions of global outputs. The US Climate Prediction Center stated the sea surface temperatures across the Pacific Ocean rose more than expected.
From 2015 to 2016, the El Niño phenomenon brought dryness to Asian sugar crops causing prices to rally. It was the last time wherein the said weather pattern supported prices.
Crude Oil Rally Boosted Sugar Prices
Prices of sugar in London rose to a 2-1/2 week high. It is caused by a rally in the West Texas Intermediate (WTI) crude oil.
On July 11, fuel went up by over 2.00%, hitting a five-week high record. As a result, the commodity gained higher values.
High crude prices benefit ethanol and may push the global sugar factories to turn their cane crush into ethanol production. The attention to fuel production instead of sweeteners would reduce its supplies.
In addition, the ISO slashed its global production forecast to 177.40 MMT, lower than the prior 180.40 MMT. Also, its 2022/23 global surplus consensus was cut down to 852,000 MT from the previous 4.15 MMT.