On Friday, July NY world sugar #11 (SBN23) closed down -0.75 (-3.01%), while Aug London white sugar #5 (SWQ23) closed down -16.60 (-2.46%).
Sugar prices continued their downward trend on Friday, reaching a two-month low as technical selling pressure intensified. The decline in sugar prices this week can be attributed to warmer weather forecasts in Brazil, which have reduced the risk of damaging frost. Additionally, the market faced additional pressure from China’s significant drop in sugar imports, with May imports plunging by 87% year-on-year to 40,000 MT. China is the largest sugar importer globally.
The ongoing sugar harvest in Brazil is also weighing on sugar prices. According to the latest report from Unica, Brazil’s sugar production for the period until May 2023/24 increased by 37.7% year-on-year to 6.972 MMT. Moreover, the percentage of sugarcane crushed for sugar rose to 46.88% compared to 40.5% in the previous year. Conab, on April 26, forecasted a 4.7% year-on-year increase in Brazil’s 2023/24 sugar output to 38.8 MMT, the second-highest on record, as crops recover from adverse weather conditions in the previous season.
Despite the decline, sugar prices find support from concerns regarding the potential disruption in global sugar production due to the El Nino weather pattern. On June 8, the U.S. Climate Prediction Center reported a rise of 0.5 degrees Celsius above normal in sea surface temperatures across the equatorial Pacific Ocean, meeting the criteria for an El Nino pattern. El Nino typically brings heavy rains to Brazil and drought to India, negatively impacting sugar crop production. The last occurrence of El Nino causing dryness in Asian sugar crops was in 2015 and 2016, leading to a surge in prices.
In April, sugar prices rallied to an 11-year high due to expectations of tighter global supplies. The Indian Sugar Mills Association (ISMA) revised down its estimate of India’s 2022/23 sugar production to 32.8 MMT from the January estimate of 34 MMT. India’s Food Secretary also mentioned that additional sugar exports might not be allowed this year due to lower-than-expected production. In 2022/23, India has permitted only 6 MMT of sugar exports, a 46% year-on-year decline compared to the 11.2 MMT allowed in 2021/22. The ISMA further projected that Indian sugar mills could divert 4.5-5.0 MMT of sugar for ethanol production in 2022/23. India is the world’s second-largest sugar producer.
The International Sugar Organization (ISO) lowered its 2022/23 global sugar production estimate to 177.4 MMT from the previous estimate of 180.4 MMT and reduced the estimated global sugar surplus for 2022/23 to 852,000 MT from the previous estimate of 4.15 MMT. On May 4, the ISO forecasted a global sugar surplus of +2.1 MMT for 2023/24.
According to the USDA’s bi-annual report released on May 25, global sugar production for 2023/24 is projected to increase by 6.0% year-on-year, reaching a record 187.881 MMT. Additionally, global human sugar consumption for 2023/24 is expected to rise by 2.3% year-on-year, reaching a record 180.045 MMT.
