Sugar prices on Wednesday posted moderate gains, with NY sugar climbing a 12-year nearest-futures high and London sugar climbing to a 6-week high. The outlook for tighter global sugar supplies is bullish for prices. On Monday, the International Sugar Organization (ISO) forecasted that 2023/24 global sugar production (Oct-Sep) will fall -1.2% y/y to 174.8 MMT, and there will be a 2023/24 global sugar deficit of -2.1 MMT, reports Nasdaq according to Barchart.
Sugar prices have rallied sharply this year and posted 12-year nearest-futures highs on concern about smaller global sugar supplies. On Sep 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.
Brazil sugar output
Sugar prices Wednesday fell back from their best levels after Unica reported that Brazil Center-South sugar output in the first half of October rose +22% y/y to 2.247 MMT and that sugar output in the 2023/24 crop year through mid-October rose +23.6% y/y to 34.862 MMT. Also, 49.44% of the crushed sugarcane was used for sugar production this year, an increase from 45.63% last year.
Export ban by India
Sugar has support from speculation that India might announce export restrictions on its sugar supplies. On Aug 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. Indian Food Secretary Chopra said India’s sugar reserves as of Oct 1 totaled 5.7 MMT, enough to meet demand for 2-1/2 months, and that it will decide whether to allow 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 Sep 30 after letting them export a record 11.1 MMT last season. India’s Sugar Mills Association (ISMA) on Aug 2 forecast that India’s 2023/24 sugar production would decline -3.4% y/y to 31.68 MMT.
Smaller sugar output in Thailand
Smaller sugar output from Thailand, the world’s second-biggest sugar exporter, is bullish for prices after the Thai Sugar Millers Corp on Sep 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 Aug 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. In addition, the USDA’s Foreign Agricultural Service (FAS) last Thursday projected that Thailand’s 2023/24 sugar production will fall -15% y/y to 9.4 MMT. 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.
El Nino
A bullish factor for sugar is concern that an El Nino weather pattern could disrupt global sugar production. On Jun 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.
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