Sugar Market Overview: Signs of a Potential Rebound

Sugar markets showed divergent trends on Thursday, with July NY world sugar inching up by +0.03% while August London ICE white sugar declined by -1.80.

Despite the fluctuations, prices held above significant lows from the previous week, hinting at potential stabilization.

Over the past seven weeks, sugar prices faced downward pressure due to increased production in Brazil, reshaping the global supply landscape.

Last Thursday, NY sugar hit a 1.5-year low, accompanied by London sugar reaching a 1.25-year low. Brazil’s sugar production soared by 84.0% year-over-year in late April, reaching 1.843 MMT, with the 2024/25 marketing year witnessing a 65.9% surge to 2.558 MMT.

Brazilian mills are increasingly prioritizing sugar over ethanol, allocating 46.96% of cane for sugar, up from 41.42% last year.A potential short-covering rally looms, driven by an excessive short position in NY sugar futures.

The latest Commitment of Traders (COT) report revealed funds boosting their net-short positions to a nearly four-year high of 72,541 contracts as of May 14.In the 2023/24 marketing year, Unica announced a 25.7% increase in Brazilian sugar production, reaching 42.425 MMT.

Conab forecasts a 1.3% year-over-year growth in Brazil’s 2024/25 sugar production, projected to reach a record 46.292 MMT, with sugar acreage expanding by 4.1% to 8.7 million hectares, the largest in seven years.

India foresees an above-average monsoon season in 2024, which could potentially enhance sugar output. India anticipates an above-average monsoon season in 2024, potentially boosting sugar output.

However, India’s Sugar and Bioenergy Manufacturers Association reported a 1.6% drop in 2023/24 sugar production from October to April, with more mills closing earlier in the season.
Thailand, facing record heat and below-average rainfall, expects its lowest cane yields in at least 13 years, with sugar production estimated at 8.77 MMT for 2023/24, surpassing earlier forecasts.

NOAA forecasts the end of the recent El Nino, potentially improving weather patterns in South America and Asia, thus boosting global sugar crops.

While the USDA projects a 4.7% year-over-year rise in global 2023/24 sugar production to 183.461 MMT, with consumption reaching 178.431 MMT, global sugar ending stocks are anticipated to fall by 13.3% to a 13-year low of 33.681 MMT.

The International Sugar Organization (ISO) revised its global sugar deficit estimate for 2023/24 to 689,000 MT.

Considering these market dynamics, including potential short-covering rallies and weather-related production impacts, the sugar market might be poised for a turnaround.

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