Sugar prices Tuesday tumbled to 5-week lows.  Weakness in the Brazilian real (^USDBRL) undercut sugar prices after the real on Tuesday dropped to a 6-month low against the dollar.  The weaker real encourages export selling from Brazil's sugar producers.  

 

 

Sugar has been under pressure over the past week on signs of ramped-up sugar production in Brazil.  Last Tuesday, Unica reported that Brazil Center-South sugar output in the first half of September rose +8.5% y/y to 3.116 MMT and that sugar output in the 2023/24 crop year through mid-September rose +18.7% y/y to 29.258 MMT.  Also, 49.37% of the crushed sugarcane was used for sugar production this year, an increase from 45.47% last year.

 

Over the past month, sugar prices have risen sharply, with NY sugar on September 19 posting a 12-year nearest-futures high and London sugar on September 14 posting a 12-year high, on concern about smaller global sugar production.  On September 5, Alvean, the world's largest sugar trader, 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 Weather Department said this year's monsoon rain (Jun-Sep) was -6% below average, the poorest monsoon rainfall in 5 years.  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.  On August 17, Conab 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.