Sugar prices on Wednesday climbed to 1-month highs but settled mixed. Sugar on Wednesday initially moved higher on the outlook for reduced sugar supplies from India after India’s Directorate General of Foreign Trade said the government will continue its curbs on sugar exports beyond Oct 31. However, sugar prices gave up most of their gains when the Directorate General did not mention how long the export restrictions would last or the amount of sugar exports India would allow for the 2023/24 season, reports Nasdaq according to Barchart.
Over the past month, sugar prices have risen sharply, with NY sugar on Sep 19 posting a 12-year nearest-futures high and London sugar on Sep 14 posting a 12-year high, on concern about smaller global sugar production. 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.
Smaller output from 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.
Increase in sugar output in Brazil
An increase in Brazil’s sugar output is bearish for prices. Last Tuesday, Unica reported that Brazil Center-South sugar output in the second half of September rose +98% y/y to 3.364 MMT and that sugar output in the 2023/24 crop year through September rose +23.8% y/y to 32.615 MMT. Also, 49.54% of the crushed sugarcane was used for sugar production this year, an increase from 45.46% last year.
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. 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.
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