On Tuesday, sugar prices fell for the third day as the Brazilian real plunged to a 6-month low against the dollar.
Sugar futures for March delivery closed 2.81% lower at ¢25.61 per pound on October 03. The soft commodity has shed 8.04% in the past three sessions and may lose another ¢0.02 per pound today.
Market watchers were not expecting such a sharp fall after the commodity hit a 12-year high of ¢27.44 on September 19. Support for the price surge came mainly from the reduced yield in India, the world’s top sugar exporter.
According to the India Meteorological Department (IMD), the June-September monsoon rain was 6.00% below average, the poorest in 5 years.
Hence, the Indian Sugar Mills Association (ISMA) forecast a 3.40% year-over-year (YoY) decline in the country’s 2023-2024 sugar production to 31.38 million metric tons (MMT).
Similarly, Thai Sugar Millers Corp. anticipates India’s production of the sweetener to fall by 18.00% YoY to 9.00 MMT. Separately, sugar trader Czarnikow predicted a more significant decline of 31.00% YoY to a 17-year low of 7.40 MMT.
Falling energy prices also dragged the sweetener’s price down. Lower oil prices prompted farmers to crush sugarcane into sugar instead of blending it into ethanol.
West Texas Intermediate (WTI) petroleum sells at $89.19 per barrel (bbl) today, 4.79% below last week’s high of $93.68 bbl.
Weak Brazilian Real Puts Pressure on Sugar Prices
Ramped-up sugarcane and beet harvests in Brazil have been putting pressure on global sugar prices since last week. The Brazilian Sugarcane Industry Association (UNICA) said sugar output in September’s first half rose 8.50% YoY to 3.17 million MMT.
The lobbying organization also reported an 18.70% YoY increase in the 2023-2024 crop sugar output to 29.26 MMT. In addition, producers increased the portion of sugarcane used to produce the white commodity to 49.37% from 45.47% last year.
More Brazilian farmers are choosing to export their produce as the weakening real diminishes profits from local selling. At yesterday’s close, the USD/BRL hit a half-year high with an exchange rate of R$5.17 for one greenback.
Another bearish factor for the grown commodity is the dwindling demand from China. In August, the country’s sugar imports plummeted by 46.40% YoY to 370,000 metric tons (MT).
