May NY world sugar #11 (SBK23) on Monday closed down -0.05 (-0.21%). May London white sugar #5 (SWK23) did not trade with markets in the UK closed for the Easter holiday.
Sugar prices Monday fell back from a 6-1/2 year nearest-futures high and closed slightly lower as a stronger dollar sparked long liquidation in sugar futures.
Fund buying pushed sugar futures higher over the past week on signs of even tighter global supplies after India's Food Secretary said India might not allow additional sugar exports this year due to lower-than-expected sugar production. India has allowed only 6 MMT of sugar exports in 2022/23 after permitting 11.2 MMT in 2021/22, down -46% y/y. Also, the Indian Sugar Mills Association (ISMA) reported India's Oct-Mar sugar production fell -3.3% y/y to 29.96 MMT last Wednesday. India is the world's second-largest sugar producer.
Another bullish factor for sugar was the recent action by the Brazilian government to change how it taxes biofuels. The government established a fixed rate for state taxes on gasoline and anhydrous ethanol, which will benefit ethanol producers and may prompt Brazil's sugar mills to produce more ethanol at the expense of sugar production.
Tropical Research Services Mar 28 cut its 2022/23 global sugar estimate to 1.6 MMT from a previous estimate of 4.5 MMT. Also, S&P Global Commodity Insights last Monday cut its 2022/23 global sugar surplus estimate to 600,000 MT from a November estimate of 5 MMT due to weaker-than-expected global sugar production.
Sugar also has support from concerns that changing weather patterns could undercut global sugar production. The U.S. Climate Prediction Center last month said the La Nina weather pattern, which has affected weather patterns over the last three years, has ended and that an El Nino weather pattern has a 61% chance of developing in the second half of this year. If that El Nino pattern occurs, it could bring heavy rains to Brazil and drought to India, negatively impacting sugar crop production. The last time El Nino brought dryness to sugar crops in Asia was in 2015 and 2016, which caused prices to soar.
Tighter global sugar supplies are bullish for prices. The International Sugar Organization (ISO) on Feb 24 raised its 2021/22 global sugar deficit estimate to -2.25 MMT from a November estimate of -1.67 MMT and cut its 2022/23 global sugar surplus estimate to 4.15 MMT from 6.19 MMT. However, the ISO still projects that global 2022/23 sugar production will climb +4.8% y/y to a record high of 180.4 MMT.
Sugar prices have underlying support from concern about smaller sugar production in India. The ISMA on Jan 31 cut its 2022/23 India sugar production estimate to 34 MMT from an Oct estimate of 36.5 MMT and cut its India 2022/23 sugar export estimate to 6.1 MMT from an Oct forecast of 9 MMT. Also, the ISMA said that it sees India's sugar mills diverting 4.5-5.0 MMT of sugar to ethanol production in 2022/23.
On the bullish side for sugar was the action by the Thai Sugar Mills Corp on Mar 29 to cut its 2022/23 Thailand sugar production estimate to 11.0 MMT from a Feb estimate of 11.5 MMT. Thailand is the world's second-largest sugar exporter.
Reduced sugar production in Europe is a supportive factor for sugar prices. The European Association of Sugar Manufacturers on Dec 8 forecasted that EU 2022/23 sugar output would fall -7% y/y to 15.5 MMT.
An increase in Brazil's sugar output is bearish for prices after Unica reported last Friday that Brazil's 2022/23 sugar production from Oct through mid-March rose +4.7% y/y to 33.583 MMT.
A negative factor for sugar was the report from Datagro on Mar 15 that projected that 2023/24 sugar production in Brazil's Center South would climb by +13.1% y/y to 38.3 MMT. Brazil is the world's largest sugar producer.
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On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
