Sugar prices rose 4% to an 11-year high amid delayed harvesting in Brazil and shrinking crops in India

Sugar prices accelerated yesterday, with May futures in New York rising 4.2% to an 11-year high of $0.2591/lb or $570/t (+23% on the month) amid a contraction harvest in India, delays in harvesting in Brazil and technical procurement related to the closing of May contracts.

Due to the limited supply of sugar available in the physical market, traders are forced to raise prices to cover short positions in the contracts.

The reduction in global sugar stocks has recently supported the quotation. According to the Indian Sugar Mills Association (ISMA), sugar production in the country from October 1 to April 15 decreased by 5.4% to 32.9 million tons. Therefore, in MY 2022/23 India, which is the world’s second largest sugar producer, will be able to allow the export of only 6 million tons of sugar, which is 46% less than the 11.2 million tons of the 2021/22 season.

On January 31, ISMA experts lowered the forecast of sugar production in the country in 2022/23 MR from 36.5 to 34 million tons, and the export forecast – from 9 to 6.1 million tons, compared to October estimates. It is also expected that 4.5- 5 million tons of sugar will be used for ethanol production.

The International Sugar Organization (ISO) on February 24 increased the forecast of the global sugar deficit in 2021/22 MR from 1.67 to 2.25 million tons, and lowered the forecast of the sugar surplus in 2022/23 MY from 6.19 to 4.15 million tons. ISO experts expect sugar production in FY 2022/23 to grow by 4.8% to a record 180.4 million tons.

According to estimates by S&P Global Commodity Insights, the global surplus of sugar in 2022/23 MY will amount to 600 thousand tons, and in 2023/24 MY will grow to 4.5 million tons.

Brazil, according to Conab’s forecast, will increase sugar production by 6% to 37 million tons in MY 2022/23, and as of April 1, it has grown by 5.2% to 33.728 million tons.

In the EU, sugar production in MY 2022/23 may fall by 7% to 15.5 million tons, which also supports prices.

The US Climate Prediction Center has increased the probability of an El Niño phenomenon from August to October from 61% to 74%. It will bring drought to India and rains to Brazil, which will adversely affect sugar production. Asia’s sugar crops were last hit by El Nino in 2015 and 2016, which sent prices soaring.

Against the background of high world prices, Ukraine can intensify the export of significant sugar reserves and increase the area of sugar beet sowing. Sugar production in 2022 amounted to 1.33 million tons, which is slightly lower than the pre-war 1.45 million tons in 2021, but fully meets domestic needs.

In 2022/23 MR, the area planted with sugar beets decreased compared to the previous season from 226 to 181.4 thousand hectares, and the number of processing plants – by 30% to 23, but the yield increased from 48 to 50 t/ha. In 2023/24 MR, the sown area will grow to 220-230 thousand hectares, and the number of plants will increase to 29.

As of September 1, 2022, sugar reserves amounted to 491 thousand tons, which with production of 1.33 million tons and consumption of 1 million tons will allow exporting 500-600 thousand tons of sugar.

As of March 28, sugar exports in the 2022/23 financial year increased 4.8 times and reached 265,000 tons, while for the entire 2021/22 financial year it amounted to only 55,000 tons.

The EU’s permission to supply sugar from Ukraine without tariff quotas and duties has changed the geography of exports. In addition, last year in Europe there was a bad harvest and high prices for natural gas, which reduced production and increased the price of sugar, so Ukraine increased sugar supplies to the EU, and will continue to work on this in the future.