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On Tuesday, sugar prices relinquished an early rise and recorded moderate declines amid indications of heightened sugar output in India, prompting extended selling.
The Indian Sugar and Bioenergy Manufacturers Association revealed that sugar production for the 2023/24 period from October to March increased by 0.4% year-on-year to 30.2 million metric tons (MMT) as more sugar mills prolonged their operations to process sugarcane.
By March 31, 322 Indian sugar mills had ceased operations, a decrease from 346 mills at the same period last year.Initially, sugar prices on Tuesday ascended to one-month highs driven by the strength in crude oil prices.
Crude prices (CLK24) surged to a 5-1/4 month peak, benefiting ethanol prices and potentially leading global sugar mills to prioritize ethanol production over sugar, thereby limiting sugar supplies.
A bearish factor for sugar stemmed from last Wednesday’s report by Unica, which indicated that Brazil’s Center-South sugar output in the first half of March surged by 313% year-on-year to 64,000 metric tons (MT).
Additionally, Brazilian sugar output for the 2023-24 marketing year until mid-March rose by 25.8% year-on-year to 42.245 MMT, with mills intensifying cane crushing for sugar rather than ethanol.
This year, mills allocated 48.96% of total cane for sugar production, up from 45.93% last year.The diminished sugar production in India serves as a bullish factor for prices.
The 2023 monsoon rainfall (June-September) was 6% below average, marking the weakest monsoon rainfall in five years. India extended restrictions on sugar exports from October 31 onwards until further notice to uphold adequate domestic supplies.
During the 2022/23 season until September 30, India permitted mills to export only 6.1 MMT of sugar after a record 11.1 MMT in the previous season. India ranks as the world’s second-largest sugar producer.
On the downside for sugar, the Indian Sugar and Bioenergy Manufacturers Association revised its forecast for India’s sugarcane production in the 2023-24 marketing year upwards by 2.9% to 34 million metric tons (MMT) from January’s estimate of 33.05 MMT.
A higher sugarcane yield is likely to translate into increased refined sugar production, depending on the portion of sugarcane converted into ethanol.
Diminished Thai sugar production provides support for sugar prices following projections by the Thai Sugar Millers Corp on February 6 that Thailand’s sugar output for 2023/24 would decline by 32% year-on-year to a 17-year low of 7.5 MMT due to severe drought conditions.
Below-average rainfall in Thailand, coupled with the current El Nino weather pattern, could further depress rainfall, with sugar millers reporting the lowest cane yield in at least 13 years. Thailand, ranking as the world’s third-largest sugar producer and second-largest exporter, is experiencing these challenges.
Sugar prices are bolstered by this year’s El Nino weather phenomenon, typically associated with heavy rains in Brazil and drought in India, which adversely affects sugar crop yields. The last occurrence of El Nino-induced dryness in Asian sugar crops was in 2015 and 2016, leading to significant price increases.
According to the USDA’s bi-annual report released on November 23, global sugar production for 2023/24 is expected to rise by 4.7% year-on-year to a record 183.461 MMT, with global human sugar consumption increasing by 1.2% year-on-year to a record 178.431 MMT.
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