Global sugar prices have slightly fallen after a recent surge. Markets are highly reactive to recent currency fluctuations and uncertainties due to weather-driven crop forecasts. A look at the price trend over the past six months shows significant fluctuations, influenced by the strength of the US dollar and volatile oil prices. In this report, we take a closer look at current market movements, the factors behind the price changes, and potential future developments.

Market Report

Sugar prices on ICE Futures US have softened slightly in October 2024 after a prior increase. On October 7, 2024, the Sugar No. 11 Futures contract for March 2025 settled at 23.00 cents per pound, down 0.99% from the previous trading day. Similar declines were seen in the London ICE White Sugar Futures, which fell by 1.22%.

Price trends over the past six months reveal a volatile market, primarily influenced by the following factors:

• Currency Fluctuations: The recent strength of the US dollar led to long liquidations in sugar futures, as a stronger dollar makes commodities more expensive for international buyers.
• Oil Price Movements: Rising oil prices initially drove sugar prices to a weekly high, as higher oil prices make ethanol production more profitable, reducing sugar supply. The possibility of diverting more sugarcane to ethanol production rather than sugar adds to market speculation.
• Weather Conditions: Weather forecasts for rain in Brazil, the world's largest sugar producer, have eased concerns about crop failures, leading to a price decline. However, uncertainty remains high, as long-term weather forecasts are still unpredictable.
• Fund Activities and Speculative Positions: Funds have increased their net-long positions to a four-year high, potentially amplifying price pressure if large-scale sell-offs occur.

Future Outlook: What Will Drive Sugar Prices in the Coming Months?

The future development of sugar prices will depend on several key factors:

• Weather Conditions in Key Growing Regions: Brazil’s weather will remain crucial. While recent rains have contributed to the price decline, any future droughts or extreme weather conditions could tighten supply and push prices higher.
• Oil Prices and Ethanol Production: Rising oil prices favor ethanol production, which reduces the availability of sugar and could support prices. Falling oil prices, on the other hand, could have the opposite effect.
• Currency Fluctuations: A strong US dollar dampens demand for sugar by making it more expensive for international buyers. If the dollar weakens, prices may rebound.
• Harvest Reports and Production Forecasts: Positive or negative reports on harvest yields in countries like Brazil, India, and Thailand will continue to shape the markets. Unexpected production shortfalls could drive price spikes.
• Political Decisions and Trade Agreements: Changes in tariffs, subsidies, or trade relationships—especially in large import markets like India or China—could influence demand and thus prices.

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Weather Shifts in Brazil: Mixed Signals for Sugar Market

The weather forecast for the next seven days in Brazil's key sugarcane-growing regions indicates mixed conditions. After a period of severe drought and heatwaves that caused substantial damage, widespread rains are now expected in the Center-South region, which is the primary sugar-producing area. These rains are anticipated to alleviate some of the deficits caused by the dry weather, although the distribution of rainfall might be uneven.

Meteorologists predict that these rains will support the growth of sugarcane in the short term, helping to reduce the impact of the drought. However, despite this temporary relief, the overall sugar production outlook remains cautious due to the previous weather-related damage. The upcoming rains should help stabilize the situation, but lower production compared to last year is still expected.

This forecast brings some short-term optimism, but the longer-term effects of the previous droughts are likely to continue influencing production estimates.

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Sugar prices could rise in the coming months if weather conditions tighten supply, oil prices rise, or the US dollar weakens. Conversely, prices may stabilize or fall if weather improves in Brazil and oil prices decrease. Market participants should remain vigilant in the coming weeks as volatility in the market remains high.





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