Increased global production forecasts could push sugar prices down

The International Sugar Organization (ISO) increased the forecast of world sugar production in 2023/24 MY from 174.8 to 179.9 mln tonnes compared to the previous estimates, and reduced the forecast of sugar deficit from 2.1 mln tonnes to 335 thsd tonnes. The increase in production in Brazil will compensate for the decline in Asia. However, so far, prices do not respond to delays in shipments from Brazil due to the congestion of the country’s ports with soybeans and corn.

It should be recalled that world sugar prices reached a 12-year high amid a possible reduction in supplies due to the El Niño weather phenomenon. March futures for white sugar No. 5 on the London Stock Exchange on Monday fell by 0.3% to 735 $/t (+2% for the month, +53% for the year), and for sugar No. 11 (cane) in New York – by 0.4% to 27.2 $/lb or 600 $/t (-1% for the month, +38% for the year).

According to Unica, sugar production in Brazil in 2022/23 MY increased by 22.6% to 37.215 mln tons compared to the previous season, including 9.4% in October. Last year, 45.83% of sugar cane was used for sugar production, while in 2022/23 MY it was already 49.39%. Experts of Green Pool Commodity raised the forecast of sugar production in Brazil in 2023/24 MY by 0.5 mln tonnes to a record 40.5 mln tonnes. However, sugar exports from Brazil in October decreased by 10% compared to September due to congestion in ports.

Thai Sugar Millers Corp predicts that sugar production in Thailand in 2023/24 MY due to severe drought will decrease by 36% compared to the previous season to a 17-year low of 7 million tons, which supports world prices. The government of the country, which is the world’s third largest sugar producer and second largest exporter, says it will declare sugar a commodity to control inflation and maintain food security, as a result of which the regulatory commission will begin to control sugar exports.

India, the world’s second largest sugar producer, has started harvesting sugar cane, but the harvest forecast for 2023/24 MY has been lowered due to the lowest monsoon rains in 5 years, which fell 6% below normal in June-September. The country’s authorities plan to limit sugar exports, but the decision will be made after receiving actual production estimates. In 2022/23 MY, the government authorized exports of only 6.1 mln tons of sugar, compared to a record 11.1 mln tons in 2021/22 season.

Amid rising global demand, Ukraine is increasing sugar exports, and in October shipped 76 thousand tons (compared to 25 thousand tons in September and 30 thousand tons in October 2022), which was the highest figure for a calendar month in recent years. The previous record was set in May 2023 and amounted to 70 thsd tonnes of sugar.

The El Niño weather phenomenon usually brings heavy rains to Brazil and drought to India, which negatively affects sugar production. The drought caused by it in Asia in 2015 and 2016 led to a sharp increase in prices.

Tags: prices, sugar