Sugar Prices Affected by Brazil’s Weather and Currency Trends

Sugar prices have declined due to forecasts of favorable rain in Brazil and a weakening Brazilian real, encouraging exports. Meanwhile, production estimates are mixed, with reductions in India and Brazil, yet projections for increased output in Thailand. The outlook for global sugar production remains complex, indicating potential for both surpluses and deficits in the market.

In the most recent trading session, May New York world sugar 11 (SBK25) declined by 0.15 points, reflecting a drop of 0.79%, while May London ICE white sugar 5 (SWK25) fell by 1.90 points, or 0.35%. This downward trend extends the recent decline in sugar prices to the lowest levels seen in two weeks, attributed to favorable rain forecasts for Brazil’s sugar-producing regions, easing concerns over dryness. According to meteorologists from Climatempo, widespread showers are anticipated across these regions into the next week.

Additionally, the Brazilian real weakened, reaching a two-week low, further pressuring sugar prices. This decline in the currency encourages Brazilian sugar producers to increase export sales. Last week, New York sugar had reached a one-month high, while London sugar hit a four-month high due to indications of reduced global sugar production.

On March 12, the Indian Sugar and Bio-energy Manufacturers Association revised its 2024/25 sugar production forecast down to 26.4 million metric tons (MMT) from 27.27 MMT, citing diminishing cane yields. Concurrently, Unica reported a year-on-year decline of 5.3% in Brazil’s Center-South sugar output for 2024/25 through mid-March, totaling 39.983 MMT. Sugar trader Czarnikow also reduced Brazil’s sugar production estimate for 2025/26 from 43.6 MMT to 42 MMT.

The International Sugar Organization (ISO), on March 6, adjusted its global sugar deficit forecast for 2024/25 to -4.88 MMT from -2.51 MMT previously, indicating a tightening market, reflecting a stark change from a global surplus of 1.31 MMT for the 2023/24 season. The ISO also decreased its global production forecast for 2024/25 to 175.5 MMT from the previous estimate of 179.1 MMT.

Conversely, market projections are offering some bearish signals. Consultant Datagro forecasts that sugar production in Brazil’s Center-South region will rise by 6% in 2025/26, totaling 42.4 MMT. Additionally, Green Pool Commodity Specialists projected a surplus in the worldwide sugar market, estimating total production at +2.7 MMT in the 2025/26 crop year.

Moreover, the Indian government recently allowed sugar mills to export 1 MMT of sugar this season, loosening restrictions imposed since October 2023 to safeguard domestic supplies. In the previous season, India facilitated the export of 6.1 MMT, significantly reduced from a record 11.1 MMT in 2021/22. However, the India Sugar Mills Association anticipates a -17.5% decline in sugar production in 2024/25.

Thailand’s outlook poses a bearish risk for sugar prices, with the Office of the Cane and Sugar Board projecting an 18% increase in 2024/25 production to 10.35 MMT, up from 8.77 MMT in the previous season. As the world’s third-largest sugar producer, any increase in Thailand’s output could impact global market dynamics.

Drought and excessive heat last year resulted in significant crop losses in Brazil’s leading sugar-producing region, São Paulo, with an estimated 5 MMT of sugarcane lost due to fires. Consequently, Conab adjusted its production estimate for Brazil’s 2024/25 output down to 44 MMT from the previous forecast of 46 MMT, attributing this to lower yields ensued from adverse weather.

The USDA’s bi-annual report released on November 21 outlined a projected 1.5% increase in global sugar production to a record of 186.619 MMT for 2024/25, while human sugar consumption was also expected to rise by 1.2% to 179.63 MMT. The report indicates a decline in global sugar ending stocks by 6.1% to 45.427 MMT.

In summary, the sugar market is currently under pressure due to favorable weather conditions for Brazil and a weakening Brazilian real, which stimulates export sales. Despite notable production reductions in India and Brazil, various forecasts suggest potential increases in sugar production in both Brazil and Thailand, leading to a bearish outlook. The anticipated global sugar market shift toward a deficit may create mixed signals for future pricing trends, reflecting the complexities of the current marketplace.

Original Source: www.tradingview.com