Sugar prices fell on Friday, with October NY world sugar down -0.31 (-1.61%) and London ICE white sugar dropping -3.80 (-0.71%). The decline was driven by a sharp drop in crude oil prices, which hit a 14-month low.
The drop in oil prices weakens ethanol values, encouraging mills to shift production toward sweeteners, thereby increasing supply and pressuring prices.
Brazil’s Fires and Drought Affect Output
Earlier last week, prices had risen to 1-1/2 month highs due to drought and fires in Brazil, a key global producer. Industry group Orplana reported that fires affected up to 80,000 hectares of cane fields in Sao Paulo, the country’s leading production state. Estimates by Green Pool Commodity Specialists suggest that up to 5 million metric tons (MMT) of cane may have been lost.
As a result, Czarnikow reduced its 2024/25 production forecast for Brazil’s Center-South region from 40.0 MMT to 39.2 MMT, citing drought and fire damage. Covrig Analytics also raised the global deficit estimate for 2024/25 from -300,000 metric tons to -600,000 metric tons.
Global Sugar Deficit Forecast and Production Trends
The International Sugar Organization (ISO) recently projected a significant global deficit of -3.58 MMT for 2024/25, much larger than the -200,000 metric ton shortage for 2023/24. They anticipate a 1.1% decline in global output, predicting production will drop from 181.3 MMT in 2023/24 to 179.3 MMT in 2024/25.
Meanwhile, India’s Food Ministry has lifted restrictions on ethanol production from cane for the 2024/25 season, which starts in November. These curbs were initially introduced to secure domestic reserves. India allowed the export of only 6.1 MMT of the commodity during the 2022/23 season, a sharp decrease from the previous season’s record of 11.1 MMT.
Brazil, the world’s largest producer, has seen a +5.4% increase in output year-on-year for the 2024/25 marketing year, with 23.91 MMT produced as of mid-August.
In contrast, favorable monsoon rains in India suggest a potentially large harvest, which could exert further downward pressure on global prices. The Indian Meteorological Department recorded 8% more rainfall than the long-term average by early September, pointing to better yields.
Meanwhile, Thailand is contending with record heat, which could harm cane crops. Despite this, the Thai government estimates that 2023/24 production will reach 8.77 MMT, higher than prior projections.
The USDA, in its May report, forecasted that global production for 2024/25 will increase by +1.4% year-on-year to a record 186.024 MMT. Global consumption is expected to rise by +0.8%, while ending stocks are forecast to decline by -4.7%, hitting a 13-year low of 38.339 MMT.
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