Sugar prices dipped for the third day, reaching a two-week low due to a weaker Brazilian real. The ISO adjusted its 2024/25 global sugar deficit forecast to -4.88 MMT and lowered production estimates to 175.5 MMT. Meanwhile, sugar exports from India are expected to increase, adding bearish pressure to the market, while Thailand anticipates a production rise of 18% for the same period.
Sugar prices have retreated for a third consecutive day, reaching a two-week low as the Brazilian real weakens. On Thursday, the International Sugar Organization (ISO) raised its forecast for the global sugar deficit in 2024/25 to -4.88 million metric tons (MMT), a significant change from its previous estimate of -2.51 MMT. Additionally, the ISO reduced its global sugar production forecast to 175.5 MMT from 179.1 MMT, indicating a tightening market following the previously anticipated surplus of 1.31 MMT for 2023/24.
The sharp increase in sugar prices earlier this month was supported by a stronger Brazilian real, which discouraged exports from Brazilian sugar producers. However, recent figures show that India’s sugar production has notably decreased by 14% year-on-year to 21.98 MMT in the current marketing year, offering some support to sugar prices. Traders have expressed concern that prolonged below-average rainfall in Brazil could delay the upcoming sugar harvest, significantly affecting sugar output.
On the bearish side, the Indian government has permitted sugar mills to export an additional 1 MMT this season, loosening restrictions initially imposed to ensure sufficient domestic supply. Last year, India only allowed 6.1 MMT to be exported, compared to a record 11.1 MMT the preceding year. Furthermore, projections indicate India’s sugar production may plummet by 15% year-on-year to a five-year low of 27.27 MMT in 2024/25.
Meanwhile, Thailand aims to increase its sugar production by 18% year-on-year, projecting an output of 10.35 MMT for 2024/25. Thailand’s boost in production could exert downward pressure on global sugar prices. Domestic issues in Brazil, such as drought and extreme heat causing crop damage, have already led to reduced production forecasts from the government agency Conab, with estimates now at 44 MMT.
The United States Department of Agriculture (USDA) anticipates a record high in global sugar production for 2024/25 at 186.619 MMT and a corresponding increase in human sugar consumption to 179.63 MMT. This forecast, paired with a projected decline in global sugar ending stocks, suggests incoming pressures on market availability, potentially affecting pricing dynamics.
According to the latest report by Rich Asplund, the author did not have any positions in the securities mentioned as of publication. For further information, readers are encouraged to refer to the Barchart Disclosure Policy.
In conclusion, the recent decline in sugar prices is primarily attributed to the weakened Brazilian real and changing forecasts for sugar production. With projections for higher production in Thailand and potential increases in Indian exports, the market faces pressures despite tight conditions in Brazil and India. These dynamics will continue to shape the global sugar market as the industry navigates production challenges and fluctuating demand.
Original Source: www.tradingview.com
