Sugar Prices Dip as Strong Dollar and Supply Factors Weigh Heavily

Sugar prices continued their downward trend on Wednesday, with March NY world sugar futures falling by -0.18 and December London ICE white sugar declining by -4.80, hitting a 1-3/4 month low. A surge in the dollar index to a one-year high pressured sugar prices further, making dollar-denominated commodities less attractive. London sugar prices dropped sharply as well, influenced by technical selling triggered when the contract fell below its 200-day moving average.

Fund Positioning and Global Production Trends Pressure Sugar Market

An extensive long position held by funds in London sugar may add to the potential for further price declines. According to the latest Commitment of Traders (COT) report, funds increased their net-long positions by 1,457 contracts to a total of 44,261 on November 5, the highest level on record since 2011. Additionally, global sugar production is expected to rise, with Thailand’s Office of the Cane and Sugar Board projecting an 18% increase for the 2024/25 season, totaling 10.35 MMT. Thailand’s growing production, as the world’s third-largest producer, could contribute to an oversupply scenario, intensifying price pressures.

India’s Crop Outlook and Export Restrictions Support Prices

India’s favorable monsoon season is likely to boost sugar production, with rainfall levels reported to be 7.6% above the long-term average. Meanwhile, Brazil’s Center-South region has faced mixed production signals; while late-October output dropped by 24.3% year-over-year, the cumulative production for 2024/25 has slightly increased by +0.3% to 37 MMT. However, drought and fires affecting up to 80,000 hectares in Sao Paulo may limit Brazil’s total output, providing some support to sugar prices.

India’s ongoing export restrictions have also lent support. Since October 2023, India has imposed limits to secure domestic supplies, allowing only 6.1 MMT to be exported in the 2022/23 season. Though the government may re-evaluate these restrictions, any lifted limits are likely to be cautious, keeping supply somewhat constrained.
In a broader context, the International Sugar Organization (ISO) has forecasted a significant global sugar deficit for 2024/25 of -3.58 MMT, up from -200,000 MT last season. Despite the USDA’s projection of a 1.4% increase in global production to 186.024 MMT, rising demand and declining ending stocks, anticipated to reach a 13-year low, could create a tighter supply landscape for the year ahead.

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