March NY world sugar #11 (SBH24) on Friday closed -0.95 (-3.65%), and March London ICE white sugar #5 (SWH24) closed -20.30 (-2.83%)
Sugar prices on Friday extended this week's sell-off, with NY sugar falling to a 3-month low and London sugar falling to a 2-month low. Increased sugar production in Brazil alleviated supply concerns and sparked fund selling of sugar. On Wednesday, Conab raised its 2023/24 Brazil sugar production estimate by +15% to 46.9 MMT from an August estimate of 40.9 MMT.
Brazil has ramped up its sugar production this year as Unica on Monday reported that Brazil Center-South sugar output in the first half of November rose +30.9% y/y to 2.19 MMT and that sugar output in the 2023/24 crop year through mid-November rose +23.1% y/y to 39.412 MMT. Also, 49.41% of the crushed sugarcane was used for sugar production this year, an increase from 45.97% last year.
Another bearish factor for sugar prices was the action by the International Sugar Organization (ISO) on Nov 15 to raise its 2023/24 global sugar production (Oct-Sep) estimate to 179.9 MMT from a previous estimate of 174.8 MMT and cut its 2023/24 global sugar deficit to -335,000 MT from a prior forecast of -2.1 MMT.
Sugar has support from heavy rain in Europe that has flooded fields and delayed sugar beet production, threatening to tighten global sugar supplies further. France recently received 32 straight days of rainfall, the longest stretch since 1998. Almost 50% of France's sugar beets remain unharvested due to flooded fields, and if the fields don't dry soon to allow fieldwork, the remainder of the beet crop might be damaged from frost.
On Nov 7, sugar rallied to 12-year highs on the outlook for tighter global sugar supplies. Congestion in Brazil's ports limited sugar exports, as a report from Green Pool Commodity Specialists said Brazil's October sugar exports fell by 10% from September. Some ships were forced to wait as long as 40 days to load sugar in Brazil's largest port.
The prospects of reduced sugar exports from Thailand are supportive of sugar prices. On Oct 31, Thailand's deputy commerce minister said the country would categorize sugar as a controlled commodity to control inflation and maintain food security, which means that a regulatory panel will be required to approve Thailand's sugar exports of a ton or more. On Nov 1, the Thai Sugar Millers Corp projected that Thailand's 2023/24 sugar production would fall by -36% y/y to a 17-year low of 7 MMT due to a severe drought. So far this year, rainfall in Thailand is well below the same period last year, and the onset of the El Nino weather system could further reduce precipitation over the next two years. Thailand is the world's third-largest sugar producer and the second-largest sugar exporter.
Speculation that India might impose restrictions on its sugar exports is a bullish factor for sugar prices. On Aug 23, Reuters reported that India is considering banning its sugar mills from exporting sugar in the 2023/24 season beginning in October as a lack of monsoon rain reduced the country's sugar crop. India's Weather Department said this year's monsoon rain (Jun-Sep) was -6% below average, the poorest monsoon rainfall in 5 years. This season, India's sugar production has declined after the National Federation of Cooperative Sugar Factories, an Indian sugar producers' group, reported Friday that India's 2023/24 sugar production Oct 1-Nov 30 was 4.32 MMT, down -10.7% y/y.
India's Food Secretary Chopra said India's sugar reserves as of Oct 1 totaled 5.7 MMT, enough to meet demand for 2-1/2 months, and that it will decide whether to allow sugar exports for 2023/24 when actual estimates of total production are available. On Nov 17, the National Federation of Cooperative Sugar Factories projected India's total 2023/24 sugar production may drop by -11.9% y/y to 29.15 MMT from 33.09 MMT in 2022/23. India allowed mills to export only 6.1 MMT of sugar during the 2022/23 season to Sep 30 after letting them export a record 11.1 MMT in the previous season.
A bullish factor for sugar is concern that an El Nino weather pattern could disrupt global sugar production. On June 8, the U.S. Climate Prediction Center said that sea surface temperatures across the equatorial Pacific Ocean had risen 0.5 degrees Celsius above normal, and wind patterns have changed to the point where El Nino criteria have been met. An El Nino weather pattern typically brings 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.
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 13-year low of 33.455 MMT. Meanwhile, ISO on Aug 10 projected that 2023/24 global sugar production would fall -1.2% y/y to 174.8 MMT and that the global sugar market in 2023/24 will fall into a deficit of -2.12 MMT from a 2022/23 global sugar surplus of +852,000 MT.
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.
