Sugar Futures Edge Up as Brazilian Real Strengthens Against Dollar

October NY world sugar #11 (SBV24) rose +0.02 (+0.11%) today, while October London ICE white sugar #5 (SWV24) remained unchanged.

Sugar prices rebounded from one-week lows, showing minimal overall movement despite strength in the Brazilian real (^USDBRL). The currency gained +0.21% against the dollar, approaching Wednesday’s four-week high. A firmer real discourages export selling from Brazilian sugar producers, providing support to prices.

Despite today’s recovery, sugar prices have faced downward pressure over the past month amid concerns about expanding global supplies. New York sugar hit a 1¾-year nearest-futures low last Monday, while London prices dropped to a 2⅓-year low. Unica reported on Tuesday that Brazil’s Center-South sugar production for the marketing year through July increased 8% year-over-year to 20.753 million metric tons (MMT).

Bullish pressure continues from optimism surrounding above-average monsoon rains in India, which could result in a record sugar harvest. The Indian Meteorological Department noted that the country received 579.7 mm of rainfall during the current monsoon season through August 11, 7% above the long-term average of 481.9 mm. India’s monsoon typically runs from June through September.

Brazil’s crop agency Conab projected on April 25 that Brazil’s sugar production for the 2024/25 marketing year would rise 1.3% year-over-year to a record 46.292 MMT, driven by increased sugarcane acreage of +4.1% to 8.7 million hectares (21.5 million acres) – the highest in seven years. For the 2023/24 marketing year that recently concluded, Unica reported on April 19 that Brazilian sugar output increased 25.7% year-over-year to 42.425 MMT.

Sugar prices reached one-week highs last Friday, supported by carryover optimism following India’s Food and Commerce Ministry announcement that export restrictions will remain in place to ensure adequate domestic supplies and support ethanol production.

The Indian Sugar and Bio-energy Manufacturers Association (ISM) reported on July 3 that India’s 2023/24 sugar reserves stood at 9.1 MMT, representing a surplus of 3.6 MMT. India has maintained sugar export restrictions since October 2023. During the 2022/23 season ending September 30, mills were permitted to export 6.1 MMT of sugar, compared to 11.1 MMT in the prior season. Additionally, ISM reported on May 13 that India’s 2023/24 sugar production from October-April declined 1.6% year-over-year to 31.4 MMT. The organization also projected on July 30 that India’s 2024/25 sugar production would decrease by 2% year-over-year to 33.31 MMT.

Record heat waves in Thailand may negatively impact the country’s sugarcane crops, potentially supporting sugar prices. Thailand’s Meteorological Department reported on May 6 that over three dozen of Thailand’s 77 provinces recorded unprecedented temperatures in April, with new highs surpassing records dating back to 1958. Sugar millers in Thailand are experiencing the lowest yields from crushed cane in at least 13 years. However, the Thai government estimated on April 22 that Thailand’s 2023/24 sugar production from December-April reached 8.77 MMT, exceeding the Thai Sugar Millers Corp’s February estimate of 7.5 MMT. As the world’s third-largest sugar producer and second-largest sugar exporter, Thailand plays a significant role in global markets.

Supporting sugar prices, the International Sugar Organization (ISO) increased its global 2023/24 sugar deficit estimate to -2.95 MMT on June 10, revising upward from its February estimate of -689,000 MT. The ISO also raised its global 2023/24 sugar demand projection to 182.2 MMT from 180.4 MMT, citing upward revisions to India’s consumption figures.

In its bi-annual report released on May 23, the USDA projected that global 2024/25 sugar production would increase 1.4% year-over-year to a record 186.024 MMT, while global human sugar consumption is expected to grow 0.8% year-over-year to a record 178.788 MMT. The USDA forecasted that 2024/25 global sugar ending stocks would decline 4.7% year-over-year to a 13-year low of 38.339 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.

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