Sugar Prices Plunge to 3-Year Low as Global Supply Rises

On January 21, sugar prices hit their lowest level in three years, following India’s decision to allow the export of 1 million tonnes of sugar by September. This move is intended to support domestic sugar mills grappling with low prices and improve factory operations.

India, the second-largest sugar producer globally, surprised the market with this export approval, especially given its forecasted production decline. Sugar output in India is expected to fall to 27 million tonnes this year. Which is down from 32 million tonnes last year, while consumption is projected to rise to 29 million tonnes. This marks the first time in eight years that India’s production will fall short of domestic demand.

Globally, improved weather in Brazil, the world’s largest sugar producer, has bolstered sugarcane harvest prospects, contributing to the price slump. On January 21, March futures for white sugar on the London Stock Exchange dropped by 8.4% to USD 0,47 per kg, representing a 10% month-on-month decline and a 29% drop year-on-year. Cane sugar futures also fell, by 7.6% to USD 0,39 per kg.

Thailand Increases Exports

Adding to the oversupply, Thailand, the second-largest sugar exporter, is forecasted to boost its production by 18% to 10,35 million tonnes during the 2024/25 marketing year. The country has redirected syrup exports to alternative markets, further increasing global sugar supply and putting additional downward pressure on prices.

Speculative Trading Adds to Market Volatility

Speculative activity has intensified in the sugar market. Between January 8 and January 14, funds increased their net short positions in sugar futures to a 5-year high of 106,045 contracts in New York and 121,425 contracts in London, according to the Commitment of Traders (COT) report. These extreme short positions could lead to a price rally if traders begin covering their positions.

Brazil’s Weather Boosts Production

Heavy rainfall in Brazil over the past four months has significantly improved sugarcane harvest prospects. With higher production potential, Brazilian processors may redirect more sugarcane to ethanol production if sugar prices remain low.

Global Market Trends

The U.S. International Agricultural Economics Agency (IAEA) forecasts global sugar production for the 2024/25 marketing year to rise by 1.5% to 186,619 million tonnes, while consumption is projected to grow by 1.2% to 179,63 million tonnes. Despite this, ending stocks are expected to decline by 6.1% to 45,427 million tonnes, indicating tighter global supplies.

EU Policies and Ukraine’s Market

The European Union’s reinstatement of duties on sugar imports from Ukraine, effective until June 2025, has kept Ukrainian sugar prices low at USD 0,80-0,81 per kg, despite fluctuations in the dollar exchange rate.

Conclusion

The global sugar market faces a complex mix of factors. Improved weather conditions in Brazil, higher output from Thailand, and India’s export decisions have contributed to oversupply and price declines. At the same time, speculative trading positions and shifts in production trends could add volatility in the coming months





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