Sugar prices fell to a 3-year low amid good weather in Brazil and India’s decision to increase exports

On January 21, sugar prices fell to a 3-year low following a decision by India, the world’s second largest sugar producer, to allow exports of 1 million tons of the product by the end of September to support local sugar mills and domestic prices, which have been under intense pressure recently.

Rumors about the export permit had been circulating for several weeks, but the decision surprised some traders, as this season’s sugar production in India will be lower than consumption for the first time in 8 years. It is expected that sugar production will decline from 32 to 27 million tons compared to last year, while consumption will reach 29 million tons.

During January, the March futures for white sugar No. 5 on the London Stock Exchange fell by 8.4% to 466 $/t (-10% for the month, -29% for the year), and for cane sugar No. 11 – by 7.6% to 17.8 $/lb or 392 $/t (-11% for the month, -33.5% for the year) amid improving weather in Brazil.

Prices are also under pressure from forecasts of increased sugar exports from Thailand after the suspension of syrup exports to China. According to the estimates of the Cane and Sugar Authority of Thailand, in 2024/25 MY sugar production in the country will increase by 18% from 8.77 to 10.35 million tons compared to the previous year. Thailand is the third largest producer and the second largest exporter of sugar in the world.

According to the weekly Commitment of Traders (COT) report, during January 8-14, funds increased their net short position in sugar in New York by 47005 contracts to a 5-year high of 106045 contracts, and in London – by 9627 contracts to a 5-year high of 121425 contracts. The very short price position of funds in sugar futures could lead to a price rally.

Heavy precipitation in Brazil over the past 4 months improves the prospects for the harvest of all crops, including sugar cane, which will increase sugar production. However, amid lower sugar prices, refiners may increase the processing of cane for ethanol.

In the report published on November 21, the USDA predicted that in 2024/25 MY world sugar production will increase by 1.5% compared to the previous season to a record 186.619 million tons, and consumption – by 1.2% to a record 179.63 million tons, while ending sugar stocks will decrease by 6.1% to 45.427 million tons.

After the European Union reintroduced duties on sugar supplies from Ukraine due to quota exceeding (which will be in effect from July 2, 2024 to June 5, 2025), sugar prices in Ukraine remain at a low level of 23-24 UAH/kg, despite the rise in the dollar.

Tags: sugar, prices