Sugar Prices Surge as Indian Production Declines – Supply Concerns Drive Market Rally

“Sugar Prices Surge as Indian Production Declines – Supply Concerns Drive Market Rally”

Closing Prices on February 4, 2025 (ICE Sugar No. 5) Converted to EUR

Using a USD/EUR exchange rate of 0.92, the latest closing prices for ICE Sugar No. 5 in EUR are as follows:

Market Analysis: Indian Supply Concerns Trigger Price Rally

The recent surge in sugar prices is directly linked to news from India, the world’s second-largest sugar producer.

1. Sharp Decline in Indian Sugar Production:
   • India’s sugar production for the 2024-25 season is expected to decline by 17%, dropping to 26.52 million tonnes, according to the All-India Sugar Trade Association (AISTA).
   • This is a sharp fall from 31.90 million tonnes in the previous season, primarily due to adverse weather conditions and disease outbreaks in key sugarcane-growing regions.
2. Tightening Global Supply Outlook:
   • India’s sugar closing stocks are forecast at just 4.50 million tonnes by September 30, 2025.
   • If these estimates hold, India’s sugar stocks will drop below two months’ domestic demand, a situation not seen in years.
   • October-November sugar demand in India is projected at 4.80-5.00 million tonnes, driven by festival consumption.
3. Market Reaction – Strong Buying Interest:
   • With India’s export potential severely impacted, traders anticipate a tighter global supply situation.
   • The March 2025 contract surged by +2.41%, reaching €484.66/t, while May 2025 rose +1.62% to €470.67/t.
   • The bullish momentum has extended across all contracts, with long-term positions also showing gains.

EU Sugar Market: Stability Despite Global Supply Concerns

• The EU sugar market remains unchanged, with prices stable between €0.50/kg and €0.54/kg FCA EU.
• Demand remains weak, as most major buyers have already secured their contracts.
• Market estimates suggest that around 30% of sugar volumes are still uncovered, but buyers are hesitant to enter the market at current levels.
• Despite the global price recovery, the European market has yet to react, with no immediate signs of upward pressure on prices.

Market Outlook: Will the Rally Continue?

📈 Short-Term:

• The Indian sugar production shortfall has triggered bullish sentiment, and if supply concerns persist, further price increases are possible.
• Markets will closely watch India’s government response, as any export restrictions could push prices even higher.

📉 Long-Term:

• If the EU market remains stable, it could act as a buffer against global price volatility.
• However, India’s weakened production outlook could have ripple effects, especially if other key producers also face challenges.

🔍 Strategic Recommendations:

• Buyers should closely monitor global developments, as supply risks are increasing.
• Producers should capitalize on the price surge, securing contracts while demand remains strong.

Conclusion

The sugar market has entered a strong bullish phase, with global prices surging due to India’s production shortfall. While the EU market remains stable, the long-term impact of India’s declining stocks could push prices higher in the coming months. Market participants should stay alert to further developments, as volatility is expected to continue.

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