Sugar Prices Decline on Brazilian Rain Forecasts and Production Changes

Sugar prices have slipped amid forecasts for rain in Brazil, potentially improving sugarcane yields. The decline follows a brief rally due to reduced global production estimates from Brazil and India. Additionally, bearish indicators from market deliveries and increased projections from Thailand contribute to the market’s instability.

Sugar prices have declined as forecasts indicate rain in Brazil next week, which may alleviate drought concerns and positively impact sugarcane yields. The May NY world sugar 11 (SBK25) fell by 0.18 cents (-0.94%), while the May London ICE white sugar 5 (SWK25) saw a decrease of 1.40 cents (-0.26%). This price drop follows a brief rally earlier in the week, when sugar prices hit a two-week high due to indications of lower global sugar production.

Reports from Unica revealed a 5.6% year-over-year decrease in cumulative sugar output in Brazil’s Center-South for the 2024/25 period. Additionally, the Indian Sugar and Bio-energy Manufacturers Association revised its production estimate for 2024/25 down to 26.4 MMT, citing lower cane yields. These reports initially contributed to a rise in sugar prices before the current decline.

The International Sugar Organization (ISO) has raised its forecast for the 2024/25 global sugar deficit to -4.88 MMT, highlighting a tighter market compared to the surplus of 1.31 MMT observed in 2023/24. Also, the ISO revised its global sugar production forecast down to 175.5 MMT for 2024/25, indicating tightening supply conditions.

Recent declining prices are connected to weak demand signals, especially after significant deliveries of raw sugar were reported. Traders Wilmar International Ltd and Sucres et Denrees SA delivered a record 1.7 MMT against expiring futures contracts, suggesting a lack of alternative markets for sellers, a typically bearish indicator for sugar prices.

Future projections indicated increased sugar production in Brazil, with Datagro estimating the 2025/26 production at 42.4 MMT, a 6% year-over-year rise. Furthermore, traders expect Brazil’s production to hit a record 43.6 MMT as the profitability of sugar production outstrips that of ethanol.

India’s recent easing of export restrictions on sugar adds bearish pressure to the market. From January 20, Indian sugar mills were allowed to export 1 MMT this season, following a period of stringent export limits. Despite this, ISMA forecasts a significant year-over-year production decline to 26.4 MMT due to adverse conditions affecting yields.

In Thailand, a substantial anticipated increase in sugar production by 18% for 2024/25 to approximately 10.35 MMT adds further downward pressure on prices. As the world’s third-largest producer, Thailand’s market changes can significantly impact global sugar prices.

Drought and excessive heat have previously damaged Brazil’s sugar crops, particularly in Sao Paulo, leading to substantial losses. The USDA, in its reports, projects an overall increase in global sugar production for 2024/25 with a rise in consumption but also notes a decrease in ending stocks.

In summary, sugar prices have experienced a decline due to forecasts of rain in Brazil, which may enhance sugarcane yields. The ongoing reports of decreased sugar production in the Center-South of Brazil and India, along with bearish signals from increased deliveries and projected production rises in Thailand, contribute to a complex market landscape. Overall, the global sugar market is facing tightening supply conditions, yet the impact of weather patterns and production forecasts continues to influence price movements significantly.

Original Source: www.tradingview.com