Sugar prices Tuesday fell sharply but remained above Monday’s significant lows. On Monday, NY sugar posted a 3-1/4 month low, and London sugar posted a 2-month low, as an increase in Brazil’s sugar production alleviated supply concerns. Last Wednesday, Conab raised its 2023/24 Brazil sugar production estimate by +15% to 46.9 MMT from an August estimate of 40.9 MMT, Nasdaq reports according to Barchart.
Also weighing on sugar prices was the weakness in crude oil (CLF24) as crude oil prices Tuesday tumbled to a 3-week low. Weaker crude prices undercut ethanol prices and may prompt the world’s sugar mills to divert more cane crushing toward sugar production than ethanol, thus boosting sugar supplies.
Brazil has ramped up its sugar production this year as Unica last Monday reported that Brazil Center-South sugar output in the first half of November rose +30.9% y/y to 2.19 MMT and that sugar output in the 2023/24 crop year through mid-November rose +23.1% y/y to 39.412 MMT. Also, 49.41% of the crushed sugarcane was used for sugar production this year, an increase from 45.97% last year. Meanwhile, Brazil exported 3.7 MMT of sugar in November, marking a new record for the month.
Another bearish factor for sugar prices was the action by the International Sugar Organization (ISO) on Nov 15 to raise its 2023/24 global sugar production (Oct-Sep) estimate to 179.9 MMT from a previous estimate of 174.8 MMT and cut its 2023/24 global sugar deficit to -335,000 MT from a prior forecast of -2.1 MMT.
On Nov 7, sugar rallied to 12-year highs on the outlook for tighter global sugar supplies. Heavy rain in Europe has flooded fields and delayed sugar beet production, threatening to tighten global sugar supplies further. Also, the prospects of reduced sugar exports from Thailand support sugar prices.