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Headlines
- Crude Oil Impact: Sugar prices are under pressure as crude oil falls to an 8-3/4 month low, influencing ethanol production and potentially boosting sugar supply.
- Production Estimates: Brazil’s sugar production forecasts are adjusted downward due to drought and fires, while global deficit projections increase.
- Supportive Factors: Despite the drop, positive signals include India's lifted ethanol restrictions and global production deficits, though increased sugar output in Brazil and favorable monsoon rains in India temper these effects.
Sugar prices have experienced a moderate decline today, with NY sugar dropping to a 1-1/2 week low. This decrease is attributed to falling crude oil prices, which have reached an 8-3/4 month low. The reduced crude oil prices impact ethanol prices and could lead sugar mills to favor sugar production over ethanol, increasing sugar supplies. Additionally, the drop in crude oil prices is affecting consumer stocks, potentially influencing broader market trends.
Last week, sugar prices had surged to 1-1/2 month highs due to drought and extreme heat causing significant fires in Brazil. These fires have severely affected sugar crops in Sao Paulo, Brazil’s primary sugar-producing region. The sugar cane industry group Orplana reported up to 2,000 fire outbreaks impacting approximately 80,000 hectares of planted sugarcane. Additionally, Green Pool Commodity Specialists estimate that up to 5 MMT of sugar cane might have been lost. Czarnikow has adjusted its Brazil Center-South 2024/25 sugar production estimate down to 39.2 MMT from 40.0 MMT due to these adverse conditions. Similarly, Covrig Analytics has revised its 2024/25 global sugar deficit estimate to -600,000 MT from -300,000 MT.
In contrast, the International Sugar Organization (ISO) has forecasted a larger global sugar deficit of -3.58 MMT for 2024/25, significantly up from the -200,000 MT deficit projected for 2023/24. The ISO also predicts a decrease in global sugar production to 179.3 MMT, a 1.1% reduction from the previous year.
On August 22, Conab, Brazil's government crop forecasting agency, reduced its 2024/25 Brazil Center South sugar production estimate to 42 MMT from 42.7 MMT due to lower sugarcane yields caused by drought and excessive heat.
In a positive development for sugar prices, India's Food Ministry has lifted restrictions on ethanol production for the 2024/25 year, which may extend India’s sugar export limits. Last December, India had restricted ethanol production to enhance sugar reserves. Since October 2023, India has restricted sugar exports to ensure sufficient domestic supplies, allowing only 6.1 MMT of sugar exports during the 2022/23 season, down from a record 11.1 MMT in the previous season.
Brazil's increased sugar production is another factor affecting sugar prices. Unica reported a 5.4% year-on-year increase in Brazil’s Center-South sugar production to 23.91 MMT for the 2024/25 marketing year through mid-August. Meanwhile, optimism about an abundant sugar crop in India due to above-average monsoon rains could also influence sugar prices. The Indian Meteorological Department reported 777.6 mm of rain during the monsoon season as of September 3, surpassing the long-term average.
