Sugar Prices Decline on Rain Forecasts and Mixed Production Outlooks

Sugar prices have decreased due to rain forecasts in Brazil, relieving dryness concerns. Initial gains this week were tied to lower global sugar production reports. The International Sugar Organization raised its global sugar deficit forecast, while increased production estimates from Brazil and Thailand are contributing to bearish market sentiment.

Sugar prices experienced a decline today, with May NY world sugar down 0.18 to 18.80 and May London ICE white sugar down 1.40 to 539.10. The downturn follows forecasts of rain in Brazil that could alleviate dryness issues and potentially enhance sugarcane yields, according to Somar Meteorologia.

Initially, sugar prices had risen to a two-week high due to reports of reduced global sugar production. Notably, Unica reported a decrease of 5.6% in the cumulative 2024/25 Center-South sugar output, while the Indian Sugar and Bio-energy Manufacturers Association revised their forecast downward, citing lower cane yields.

The International Sugar Organization (ISO) increased its prediction for the global sugar deficit for 2024/25 to 4.88 million metric tons, indicating a tighter market in contrast to a surplus of 1.31 million metric tons in 2023/24. Furthermore, Green Pool Commodity Specialists forecast a surplus in the global sugar market for the 2025/26 crop year, predicting an estimated 2.7 million metric tons surplus, a marked shift from the prior year’s deficit.

Despite this, last Thursday saw sugar prices drop to seven-week lows following large raw sugar deliveries by traders, which signaled weak demand. In addition, projections of increased sugar production in Brazil and Thailand added to the bearish sentiment surrounding sugar prices.

Concerns over sugar exports from India remain, as the government has lifted some restrictions on sugar exports, while still anticipating a significant drop in domestic production for the 2024/25 season. Projections indicate a 17.5% decrease, marking a five-year low in production.

Simultaneously, Thailand’s sugar production is expected to rise significantly, projected to increase by 18% year-on-year. This highlights Thailand’s position as a major player in the global sugar market, which could further influence sugar prices.

Brazil’s sugar industry has faced challenges due to drought and fires, which have adversely affected production estimates. CONAB revised its forecast for 2024/25 down to 44 million metric tons, noting lower yields due to these adverse conditions.

In conclusion, sugar prices are currently under pressure due to both positive forecasts for rain in Brazil and significant increases in production expected from other global producers. While initial rises were prompted by reduced production estimates, current indicators suggest a shift towards increased supply and lower demand, leading to price declines. As Brazil’s conditions improve and production forecasts yield promising figures globally, it is essential for investors to remain vigilant and informed regarding market trends.

Original Source: www.tradingview.com