May NY world sugar #11 (SBK23) on Wednesday closed down -0.17 (-0.69%), and Aug London white sugar #5 (SWQ23) closed up +4.00 (+0.59%).
Sugar prices Wednesday settled mixed. Signs of tighter global supplies have prompted fund buying of sugar futures over the past two weeks, with NY sugar posting an 11-year high Wednesday and London sugar posting an 11-year high last Tuesday.
However, NY sugar gave up an early advance Wednesday and closed moderately lower after WTI crude prices (CLK23) fell more than -1% to a 2-1/2 week low. Weaker crude prices undercut ethanol prices and may prompt the world's sugar mills to divert more cane crushing toward sugar production than ethanol, thus boosting sugar supplies.
The Indian Sugar Mills Association (ISMA) reported Wednesday that India's 2022/23 (Oct 1-Apr 15) sugar production fell -5.4% y/y to 32.9 MMT. India is the world's second-largest sugar producer. Also, 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 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.
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. Tropical Research Services Mar 28 cut its 2022/23 global sugar estimate to 1.6 MMT from a previous estimate of 4.5 MMT.
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.
Sugar has support from concerns that changing weather patterns could undercut global sugar production. The U.S. Climate Prediction Center last Thursday raised the likelihood of an El Nino weather pattern emerging between August and October to 74% from 61% a month ago. 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 negative side, S&P Global Commodity Insights on Monday projected the 2023/24 global sugar surplus would climb to +4.5 MMT from a 2022/23 global sugar surplus of 600,000 MT.
An increase in Brazil's sugar output is bearish for prices after Unica last Wednesday reported that Brazil's 2022/23 sugar production from Oct through March rose +5.2% y/y to 33.728 MMT.
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.
