The global sugar market experienced a significant price adjustment on Tuesday, with New York world sugar #11 (SBH24) and London ICE white sugar #5 (SWK24) both closing lower amid a strong surge in sugar production from Brazil, the world's leading sugar producer. March NY world sugar closed down 0.33 (-1.43%), while May London ICE white sugar closed down 7.20 (-1.14%), reaching 1-month lows.
This downturn is primarily attributed to Brazil's impressive increase in sugar output. Unica's latest report highlighted a staggering 68.5% year-over-year jump in Brazil's Center-South sugar production in the latter half of January, reaching 28,000 metric tons (MT). Furthermore, the cumulative sugar output for the 2023/24 crop year through January escalated by 25.5% year-over-year to 42.129 million metric tons (MMT). A notable shift towards sugar over ethanol production was observed, with 49.04% of cane crushed for sugar this crop year, an increase from the previous year's 45.95%.
While Brazil's production surge exerts downward pressure on prices, the reduced sugar output in India, the world's second-largest sugar producer, introduces a bullish sentiment. The Indian Sugar Mills Association (ISMA) reported a 2.5% decline in sugar production for the October-February 15 period of the 2023/24 season, with production estimates revised down to 33.05 MMT from the previous year's 36.6 MMT. This decrease is partly due to below-average monsoon rainfall, leading India to extend sugar export restrictions to safeguard domestic supplies.
India's recent imposition of a 50% export tax on molasses, a by-product of sugar refining, further suggests that the nation's sugar export restrictions could remain in place, potentially tightening global supplies.
Global sugar production concerns are also heightened by Thailand's forecast, projecting a 32% year-over-year decrease in sugar production to a 17-year low of 7.5 MMT, attributed to severe drought conditions. Thailand, a key player in the global sugar market, faces its lowest cane yield in over a decade, exacerbated by the ongoing El Nino weather phenomenon, which threatens to disrupt sugar production across several major producing regions.
Despite these regional challenges, the USDA's optimistic global outlook, projecting a 4.7% increase in global sugar production to a record 183.461 MMT, contrasts with the International Sugar Organization's (ISO) forecast of a slight decline in production and a deficit in the global sugar market for the 2023/24 season.
As the market navigates through these conflicting signals, stakeholders remain vigilant, monitoring weather patterns, production adjustments, and policy changes that could influence the delicate balance of global sugar supply and demand.