Sugar prices continued their decline for the second consecutive day, driven by global trade concerns and a sharp drop in crude oil prices. May NY world sugar #11 (SBK25) fell by 1.67%, and May London ICE white sugar #5 (SWK25) dropped by 1.38%. The overall market downturn, fueled by fears of a trade war, has pushed risk-off sentiment in asset markets, affecting sugar prices.
A significant drop of 7% in WTI crude oil prices, reaching a near four-year low, is also impacting the sugar market. Lower crude prices weaken ethanol values, which may encourage sugar mills worldwide to shift from producing ethanol to increasing sugar output. This shift would lead to a rise in sugar supplies.
Additionally, the Brazilian real’s weakness has further pressured sugar prices. The currency hit a three-week low against the dollar, prompting Brazil’s sugar producers to increase exports. On Monday, sugar prices reached a three-week low after Climatempo reported above-average rainfall in Brazil, benefitting the country’s sugar crops.
Despite the recent downturn, there are factors supporting sugar prices, including signs of lower global sugar production. On March 12, the Indian Sugar and Bio-energy Manufacturers Association lowered its 2024/25 sugar production forecast to 26.4 million metric tons (MMT), down from 27.27 MMT due to lower cane yields. Similarly, Brazil’s sugar output through mid-March was reported at 39.983 MMT, a 5.3% year-on-year decrease. Sugar trader Czarnikow also reduced its Brazil 2025/26 sugar production forecast to 42 MMT from 43.6 MMT.
In contrast, the International Sugar Organization (ISO) raised its global sugar deficit forecast for 2024/25 to 4.88 MMT, up from 2.51 MMT in November. The ISO also lowered its global sugar production forecast for 2024/25 to 175.5 MMT, down from 179.1 MMT. However, some bearish reports suggest a possible global sugar surplus. Datagro, on March 12, projected a 6% increase in Brazil’s 2025/26 sugar production, and Green Pool Commodity Specialists predicted a surplus of 2.7 MMT in the 2025/26 crop year, reversing the deficit forecast for 2024/25.
A recent decision by the Indian government to ease sugar export restrictions by allowing the export of 1 MMT this season could also affect the market. India’s sugar production for 2024/25 is expected to fall by 17.5% to a five-year low of 26.4 MMT.
The prospect of higher sugar production in Thailand is another factor weighing on sugar prices. Thailand’s 2024/25 sugar production is expected to increase by 18% to 10.35 MMT, according to the Office of the Cane and Sugar Board. Thailand is the world’s third-largest sugar producer and the second-largest exporter.
The impact of Brazil’s drought and fires last year, which damaged sugar crops in São Paulo, the country’s leading sugar-producing state, has further complicated the outlook. Green Pool Commodity Specialists estimated that 5 MMT of sugarcane may have been lost due to the fires. Brazil’s crop forecasting agency, Conab, has since revised its 2024/25 sugar production estimate down to 44 MMT from 46 MMT due to lower cane yields.
The USDA’s November report projected a 1.5% year-on-year increase in global sugar production for 2024/25, reaching a record 186.6 MMT. Global sugar consumption is also expected to rise by 1.2% to 179.6 MMT, with ending stocks forecasted to fall by 6.1% to 45.4 MMT.
In summary, while sugar prices are currently under pressure, factors like lower production forecasts in major producing countries and a tightening global market may provide some support to prices in the longer term.
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