Sugar Prices Erase Early Gains as the Dollar Rallies

March NY world sugar #11 (SBH25) today is down -0.33 (-1.42%), and December London ICE white sugar #5 (SWZ24) is down -7.30 (-1.25%).

Sugar prices today fell back from 1-week highs and turned lower after the dollar index (DXY00) jumped to a 7-week high,  prompting long liquidation in sugar futures.

Sugar today initially rose to a 1-week high after crude oil prices (CLX24) rose to a 5-week high.  Strength in crude oil benefits ethanol prices and may prompt global sugar mills to divert more cane crushing toward ethanol production rather than sugar, thus reducing sugar supplies.

Last Thursday, NY sugar posted a 7-month high.  Drought conditions in Brazil have reduced the country's sugar production prospects and have pushed sugar prices sharply over the past two weeks.  On September 20, Rabobank cut its 2024/25 Brazil sugar production forecast to 39.3 MMT from a previous forecast of 40.3 MMT, citing excessive dryness.  

Drought and excessive heat have caused recent fires in Brazil that damaged sugar crops in Brazil's top sugar-producing state of Sao Paulo.  Sugar cane industry group Orplana said that as many as 2,000 fire outbreaks affected up to 80,000 hectares of planted sugarcane in Sao Paulo.  Green Pool Commodity Specialists said that as much as 5 MMT of sugar cane may have been lost due to the fires.

Optimism that above-average monsoon rains in India will lead to a bumper sugar crop is bearish for sugar prices.  The Indian Meteorological Department reported Monday that India received 934.8 mm of rain during the current monsoon season as of September 30, the most in four years and 7.6% more than the comparable long-term average of 868.6 mm.  India's monsoon season runs from June through September.

Also undercutting sugar prices was last Friday's action by researcher StoneX to raise its global 2024/25 sugar surplus estimate to 2.0 MMT from a July estimate of 1.2 MMT, citing an improved production outlook in India and Thailand.  Also, increased sugar production in Brazil is bearish for prices.  Unica reported last Friday that Center-South sugar production in the 2024/25 season through mid-September is up +3.6% y/y at 30.327 MMT.

In a supportive factor for sugar prices, the International Sugar Organization (ISO) on August 30 forecasted a 2024/25 global sugar deficit of -3.58 MMT, much larger than the estimated -200,000 MT deficit for 2023/24.  ISO forecasted 2024/25 global sugar production of 179.3 MMT, down -1.1% y/y from 181.3 MMT in 2023/24.    

Meanwhile, Conab, Brazil's government crop forecasting agency, cut its 2024/25 Brazil Center South sugar production estimate on August 22 to 42 MMT from a previous forecast of 42.7 MMT, citing lower sugarcane yields due to drought and excessive heat.

In another supportive factor for sugar prices, India's Food Ministry on August 30 lifted restrictions on sugar mills producing ethanol for the 2024/25 year that starts November, which may prolong India's sugar export curbs.  Last December, India ordered sugar mills to stop using sugarcane to produce ethanol for the 2023/24 supply year to boost its sugar reserves.  India has restricted sugar exports since October 2023 to maintain adequate domestic supplies.  India allowed mills to export only 6.1 MMT of sugar during the 2022/23 season to September 30 after allowing exports of a record 11.1 MMT in the previous season.  However, last Thursday, the Indian Sugar and Bio-energy Manufacturers Association (ISM) said India will have 2 MMT of sugar to export next season and urged the government to lift its current sugar export restrictions.

The Indian Sugar and Bio-energy Manufacturers Association (ISM) reported on May 13 that India's 2023/24 sugar production from Oct-Apr fell -1.6% y/y to 31.4 MMT.  Also, the ISM on Thursday projected India's 2024/25 sugar production would fall by -2% y/y to 33.3 MMT and that India's 2023/24 sugar reserves will be at 8.4 MMT on September 30, compared with a May projection of 9.1 MMT.  

The outlook for higher sugar production in Thailand is bearish for sugar prices.  Last Tuesday, Thailand's Office of the Cane and Sugar Board projected that Thailand's 2024/25 sugar production would jump by +18% y/y to 10.35 MMT.  Thailand produced 8.77 MMT of sugar in the 2023/24 season that ended in April.  Thailand is the world's third-largest sugar producer and the second-largest sugar exporter.

The USDA, in its bi-annual report released on May 23, projected that global 2024/25 sugar production would climb +1.4% y/y to a record 186.024 MMT and that global 2024/25 human sugar consumption would increase +0.8% y/y to a record 178.788 MMT.  The USDA forecasted that 2024/25 global sugar ending stocks would fall -4.7% y/y to a 13-year low of 38.339 MMT.  
 

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