Sugar Prices Decline Amid Brazilian Rain Forecasts and Production Update

Sugar prices have declined in response to rain forecasts for Brazil, easing drought concerns that could enhance sugarcane yields. This comes despite earlier rises due to reduced global sugar production reports from multiple sources. Additionally, expectations of falling production in India and increased outputs in Thailand and Brazil contribute to the market volatility.

On May 2, sugar prices declined as forecasts for rain in Brazil eased concerns of drought affecting sugarcane yields. May NY world sugar 11 fell by 0.18 cents, or 0.94%, while May London ICE white sugar 5 dropped by 1.40 cents, or 0.26%, after reaching two-week highs earlier in the week. Somar Meteorologia predicts widespread rainfall in Brazil next week, which could boost sugarcane production.

Despite the rainfall forecast, sugar prices had initially risen due to reduced global production indicators. Reports from Unica indicated a 5.6% decline in 2024/25 Center-South sugar output compared to previous years, with production through February at 39.822 million metric tons (MMT). Additionally, the Indian Sugar and Bio-energy Manufacturers Association lowered its production forecast for India, now expecting 26.4 MMT, down from a prior estimate of 27.27 MMT due to decreased cane yields.

The International Sugar Organization (ISO) raised its predictions for the global sugar deficit in 2024/25 to 4.88 MMT, indicating market tightness as opposed to the previously estimated surplus of 1.31 MMT. Furthermore, the ISO notably decreased its 2024/25 global sugar production forecast to 175.5 MMT from 179.1 MMT previously. In contrasting assessments, Green Pool Commodity Specialists anticipate a surplus of 2.7 MMT for the 2025/26 crop year after a deficit in the preceding year.

Notably, sugar prices experienced a dip due to weak demand, evidenced by large deliveries by traders against March NY futures contracts. Wilmar International Ltd and Sucres et Denrees SA registered record deliveries, totaling 1.7 MMT of raw sugar, which is often seen as indicative of weak selling opportunities.

Additionally, projections by Datagro indicated that Brazilian sugar production could increase to 42.4 MMT in 2025/26, reflecting a 6% year-over-year rise. Czarnikow forecasted an even higher production figure of 43.6 MMT for Brazil in 2025/26, highlighting the financial incentives of sugar production over ethanol.

In terms of exports, the Indian government recently permitted its mills to export 1 MMT of sugar, easing prior restrictions aimed at maintaining domestic supply adequacy. ISMA projects a substantial drop in India’s 2024/25 sugar production, estimating a 17.5% decline to 26.4 MMT, which is a five-year low.

Thailand’s anticipated increase in sugar production adds further bearish sentiment, with projections estimating an 18% rise to 10.35 MMT for the 2024/25 season. As the world’s third-largest sugar producer, Thailand’s output is significant for the global market.

Last year’s droughts and heat caused severe crop damage in Brazil’s main sugar-producing region, São Paulo. Green Pool noted a loss of approximately 5 MMT of sugar cane. Consequently, Brazil’s government has revised its 2024/25 sugar production estimate downward from 46 MMT to 44 MMT, citing adverse weather effects.

Additionally, the USDA expects a slight increase of 1.5% in global sugar production for 2024/25 to a record 186.619 MMT, with human consumption projected to rise by 1.2% to 179.63 MMT. The USDA has also noted a reduction of 6.1% in global sugar ending stocks to 45.427 MMT for 2024/25.

All the updates provided in this article were intended for informational purposes only, with no financial positions held by the author, Rich Asplund, in any mentioned securities. Further details can be found in the Barchart Disclosure Policy.

In conclusion, sugar prices have influenced fluctuating trends due to a combination of rainfall forecasts in Brazil, signs of reduced global production, and weak demand indicators. As various forecasts anticipate changes in production, both in Brazil and globally, the market dynamics continue to evolve. Observers should remain attentive to these developments while the sugar market navigates complex environmental and economic factors influencing supply and demand.

Original Source: www.tradingview.com