Sugar prices on Friday settled mixed.  Sugar prices had carryover support from Thursday after the head of commodities at ED&F Man said India is unlikely to export sugar in the 2023/24 season that begins October 1 to ensure adequate domestic supplies.

 

Sugar prices fell back from their best levels Friday, and London sugar turned negative after commodity trader Sucden projected Brazil's 2023/24 sugar output would climb +19.8% y/y to 40.4 MMT.

 

Over the past few weeks, sugar prices have risen sharply, with NY sugar posting a 12-year nearest-futures high Tuesday and London sugar posting a 12-year high last Thursday, on concern about smaller global sugar production.  On September 5, Alvean, the world's largest sugar trader, said it expects a 2023/24 global sugar deficit of -5.4 MMT, the sixth year of shortages, as India may curb sugar exports and Thailand farmers plant more profitable cassava instead of sugarcane.

 

 

Sugar has support from speculation that India might soon announce export restrictions on its sugar supplies.  On August 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 Jun-Aug monsoon rain was -10% below normal, and in August, India received only 162.7 mm of rain, the least since at least 1901.  India's food ministry said it will make a final decision about sugar exports for 2023/24 when actual estimates of total production are available.   India allowed mills to export only 6.1 MMT of sugar during the current 2022/23 season to September 30 after letting them export a record 11.1 MMT last season.  India's Sugar Mills Association (ISMA) on August 2 forecast that India's 2023/24 sugar production would decline -3.4% y/y to 31.68 MMT.

 

Smaller sugar output from Thailand, the world's second-biggest sugar exporter, is bullish for prices after the Thai Sugar Millers Corp on September 7 projected Thailand's 2023/24 sugar production would fall by -18% y/y to 9 MMT due to a severe drought.  Separately, sugar trader Czarnikow projected on August 7 that Thailand's 2023/24 sugar production would drop -31% y/y to a 17-year low of 7.4 MMT due to dry weather.  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 lower precipitation even further over the next two years.  Thailand is the world's third-largest sugar producer.

 

Another negative factor for sugar is reduced demand from China after China's August sugar imports tumbled -46.4% y/y to 370,000 MT.

 

A bearish factor for sugar is the strong sugar output in Brazil.  Last Wednesday, Unica reported that Brazil Center-South sugar output in the second half of August rose +9.9% y/y to 3.461 MMT and that sugar output in the 2023/24 crop year through August rose +20% y/y to 26.146 MMT.  Also, 49.17% of the crushed sugarcane was used for sugar production this year, an increase from 45.16% last year.  Separately, Conab on August 17 raised its Brazil 2023/24 sugar production estimate to 40.9 MMT from an April forecast of 38.8 MMT as favorable weather conditions boosted sugarcane yields.  

 

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 August 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.