Despite the slight growth, stock market quotations for sugar remain 21-39% lower than last year

On the London Stock Exchange, October futures for white sugar No. 5 for the week fell by 2% to $537/t (+2.2% for the month), and for sugar No. 11 – by 2.8% to $18.91 /lb or $417/t (+5.9% for the month), which is 21% and 39% lower than last year, respectively.

The decline in world sugar prices is due to forecasts of an increase in world production of cane sugar, especially in Brazil. Against the backdrop of falling oil prices, factories are reducing sugar cane processing for ethanol and increasing sugar processing.

A slight increase in quotations in the previous week is associated with an increase in the number of fires in Brazil due to severe drought. More than 2,000 fires were recorded in the main sugar-producing state, which damaged 80,000 hectares of sugar cane crops. On August 22, the Conab agency lowered its forecast for sugar production in the Central and Southern regions of the country in 2024/25 from 42.7 to 42 million tons, as excessive heat will greatly reduce cane productivity. Last week, the Czarnikow agency lowered its estimate of sugar production in these regions from 40 to 39.2 million tons.

In India, 777.6 mm of rain fell during the monsoon season (from June to September), which is 8% higher than the annual average (721.1 mm) and contributes to the increase in sugar production.

According to the Indian Association of Sugar and Bioenergy Producers (ISM), sugar reserves in the country in MY 2023/24 amounted to 9.1 million tons, with a surplus of 3.6 million tons. In MY 2024/25, sugar production is expected to decrease by compared to the previous season by 2% to 33.31 million tons.

The Indian government has restricted the production of ethanol by sugar mills for MY 2024/25 (which starts in November), and may extend the restrictions on sugar exports. From October 2023, to support the domestic market, India limited sugar exports for the 2022/23 MR at the level of 6.1 million tons, while in MY 2021/22 it shipped a record 11.1 million tons. In December 2023, sugar factories were prohibited from processing sugar cane for ethanol in MY 2023/24.

The International Sugar Organization (ISO) predicts that in 2024/25 the global sugar deficit will increase compared to the previous season from 200,000 tons to 3.58 million tons, and world production will decrease by 1.1% from 181.3 to 179.3 million tons.

At the same time, the USDA forecast in May that in 2024/25, world sugar production will grow by 1.4% compared to the previous season to a record 186.024 million tons, world consumption by 0.8% to a record 178.788 million tons, and global final stocks will decrease by 4.7% to a 13-year low of 38.339 million tons.

Falling oil prices could change the global sugar balance, as falling ethanol prices would lead to increased sugar production and inventories.

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Tags: prices, sugar, India