On Monday, sugar prices experienced moderate losses due to a stronger dollar, which led to long liquidation in sugar futures. Additionally, sugar prices are facing downward pressure as farmers hedge their selling ahead of the upcoming Brazil sugar harvest. According to Conab’s April 26 forecast, Brazil’s sugar output for 2023/24 is expected to increase by 4.7% year over year to 38.8 MMT, which would be the second-highest output ever recorded, as crops recover from the previous season’s adverse weather.
Prices are likely to be negatively affected by a sugar surplus this year. Global sugar surpluses are expected to fall to +2.1 MMT in 2023/24 from +4.15 MMT in 2022/23, according to the International Sugar Organization (ISO).
As of late April, sugar prices were at their highest point in 11 years. The price of sugar surged after the government announced plans to curb sugar exports due to lower-than-expected sugar production in India. A January estimate of 34 MMT for India’s sugar production in 2022/23 has been cut to 32.8 MMT by the Indian Sugar Mills Association (ISMA) on April 26. The Indian Food Secretary said this year’s sugar exports may not be allowed due to lower than expected production. India has allowed only 6 MMT of sugar exports for 2022/23, down from 11.2 MMT allowed in 2021/22, a 46% decline from the previous year. ISMA on Jan. 31 lowered its estimate for India’s 2022/23 sugar exports to 6.1 MMT from a forecast of 9 MMT in October. ISMA also projects Indian sugar mills will divert 4.5-5.0 MMT of sugar for ethanol production in 2022/23. India is the world’s second-largest sugar producer.
Sugar prices have risen sharply in the past four months due to tighter global sugar supplies. The ISO on Feb. 24 raised its estimate for the 2021/22 global sugar deficit to -2.25 MMT from -1.67 MMT in November and lowered its estimate for the 2022/23 global sugar surplus to 4.15 MMT from 6.19 MMT. However, ISO continues to project that global sugar production in 2022/23 will increase +4.8% year-on-year to a record high of 180.4 MMT. On Tropical Research Services on March 28 lowered its estimate for the 2022/23 global sugar surplus to 1.6 MMT from 4.5 MMT previously.
Sugar has support from concerns that changing weather patterns could undermine global sugar production. The U.S. Climate Prediction Center on April 20 raised the probability of an El Nino weather pattern occurring between August and October to 74% from 61% the previous month. If this El Nino pattern were to occur, it could lead to heavy rains in Brazil and drought in India, which would negatively impact sugar production. The last time El Nino brought drought to sugar crops in Asia was in 2015 and 2016, which sent prices soaring.
On April 20, Conab forecast Brazilian sugar production to increase 6% y/y to 37 MMT in 2022/23. On April 17, S&P Global Commodity Insights forecast that the global sugar surplus would increase to +4.5 MMT in 2023/24, from a global sugar surplus of 600,000 MT in 2022/23.
Sugar Short (Sell)
Enter At: 25.69
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