Global Sugar Prices Under Pressure Amid Higher Production Outlook
Sugar Prices Hit 18-Month Low
Global sugar prices have dropped to an 18-month low of $0,41 per kg for futures expiring in July on the InterContinental Exchange, New York. Prices have hovered around this level since mid-last month. Despite a slight projected decline in Brazil's domestic production for the 2024-25 season, output remains substantial at 41 million tonnes, surpassing historical averages. Conversely, Thailand's production is on track for a robust recovery. With a 16.4% year-on-year increase to 10.2 million tonnes, following an El Niño-affected season. India's production is also poised for a slight increase in 2024-25, though it will remain below historical trends.Fund Houses Take Short Positions as Prices Trend Down
According to Praful Vithalani, Chairman of the All India Sugar Trade Association (AISTA), global sugar prices have been trending down as fund houses have taken short positions. Importing countries have stayed away, waiting for even lower price levels. The World Bank's Commodity Outlook noted that sugar prices plummeted by 17% in December 2023. And remained at that level in early 2024, reflecting increased production in Brazil. BMI, a unit of Fitch Solutions, revised its global production forecast upwards to 182.9 million tonnes for the 2023-24 season, a 3.7% year-on-year increase. A further 1.5% climb to 185.7 million tonnes is projected for the 2024-25 season.Ethanol Prices Influence Higher Sugar Output
Brazil's sugar production has significantly increased, from 38 million tonnes in 2022-23 to 45.5 million tonnes in 2023-24, and is expected to stay high at 44 million tonnes next year. Low ethanol prices in Brazil have led to higher sugar production as mills find sugar more profitable. The World Bank predicts that weakening El Niño conditions in early 2024 should ease supply constraints in India and Thailand. Leading to price declines of 3% and 8% year-on-year in 2024 and 2025, respectively. BMI has adjusted its sugar price forecast for 2024, lowering it from $0,52 to $0,46 per kg. Global consumption is expected to climb to 178.8 million tonnes in the 2023-24 season and 179,7 million tonnes in the 2024-25 season, a modest 0.5% year-on-year growth.Despite current price pressures due to high global production forecasts, the sugar market may see stabilization as consumption gradually increases. The interplay of Brazil's significant output, expected easing of El Niño. And strategic market positions will be key factors to watch.
