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

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“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:

Contract Closing Price (USD/t) Closing Price (EUR/t) Change (EUR) % Change
March 2025 526.80 484.66 +11.68 +2.41%
May 2025 511.60 470.67 +7.64 +1.62%
August 2025 493.90 454.39 +6.44 +1.42%
October 2025 484.80 446.02 +4.51 +1.01%
December 2025 481.80 443.26 +2.67 +0.60%
March 2026 484.80 445.62 +1.75 +0.39%
May 2026 486.70 447.76 +1.75 +0.39%
August 2026 488.00 448.96 +1.75 +0.39%
October 2026 486.40 447.49 +1.29 +0.29%
December 2026 486.40 447.49 +0.92 +0.21%
March 2027 487.90 448.87 +0.92 +0.20%
May 2027 485.30 446.48 +0.92 +0.21%
August 2027 485.10 446.29 +0.92 +0.21%
October 2027 484.40 445.65 +0.92 +0.21%

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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