Get all your news in one place.
100’s of premium titles.
One app.
Start reading
Barchart
Barchart
Rich Asplund

Sugar Prices Retreat on Weakness in Crude Oil and the Brazilian Real

July NY world sugar #11 (SBN23) on Wednesday closed down -0.27 (-1.07%), and Aug London white sugar #5 (SWQ23) closed down -10.70 (-1.51%).

Sugar prices Wednesday posted moderate losses.  Weakness in crude prices and the Brazilian real Wednesday weighed on sugar prices.  Crude (CLN23) fell to a 3-1/2 week low, which undercuts ethanol prices and may prompt the world's sugar mills to divert more cane crushing toward sugar than ethanol, thus boosting sugar supplies.  Also, the Brazilian real (^USDBRL) Wednesday tumbled to a 2-month low against the dollar, encouraging Brazil's sugar producers to increase export selling.  

Ramped-up Brazil sugar production is bearish for prices after Unica last Thursday reported  Brazil's 2023/24 sugar production through mid-May was up +48% y/y at 4.063 MMT and that the percentage of sugarcane crushed for sugar rose to 45.6% from 38.5% last year.  Conab on Apr 26 forecasted that Brazil's 2023/24 sugar output would climb +4.7% y/y to 38.8 MMT, the second most ever, as crops recover from the previous season's adverse weather.

The USDA, in its bi-annual report released on May 25, projected that global 2023/24 sugar production would climb +6.0% y/y to a record 187.881 MMT and that global 2023/24 human sugar consumption would increase +2.3% y/y to a record 180.045 MMT.  The USDA also forecasted that 2023/24 global sugar ending stocks would fall -15.2% y/y to a 5-year low of 33.455 MMT.

Last month, sugar prices rallied to 11-year highs on the outlook for tighter global supplies.  On Apr 26, the Indian Sugar Mills Association (ISMA) cut its 2022/23 India sugar production estimate to 32.8 MMT from a Jan estimate of 34 MMT.  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.  The ISMA on Jan 31 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.  India is the world's second-largest sugar producer.

Another supportive factor for sugar was last Monday's action by the International Sugar Organization (ISO) to cut its 2022/23 global sugar production and sugar surplus estimates.  The ISO cut its 2022/23 global sugar production estimate to 177.4 MMT from a previous estimate of 180.4 MMT and cut its 2022/23 global sugar surplus estimate to 852,000 MT from a previous estimate of 4.15 MMT.  ISO on May 4 forecasted a global 2023/24 sugar surplus of +2.1 MMT.  

Sugar prices have support from changing weather patterns that could undercut global sugar production.  On May 11, the U.S. Climate Prediction Center raised the likelihood of an El Nino weather pattern emerging between August and October to 94% from the 74% forecast last month.  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.

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.
Sign up to read this article
Read news from 100’s of titles, curated specifically for you.
Already a member? Sign in here
Related Stories
Top stories on inkl right now
One subscription that gives you access to news from hundreds of sites
Already a member? Sign in here
Our Picks
Fourteen days free
Download the app
One app. One membership.
100+ trusted global sources.