Source: Ukragroconsult (Ukraine)
Exchange prices for sugar on January 21 fell to a 3-year low on the background of the decision of India, the world’s second largest sugar producer, to allow export of 1 million tons of the product by the end of September to support local sugar mills and domestic prices, which have recently been under strong pressure.
Rumors about allowing exports have been circulating for several weeks, but such a decision surprised some traders, as in the current season, India’s sugar production will be less than consumption for the first time in 8 years. Sugar production is expected to fall from 32 million tons to 27 million tons compared to last year, while consumption is expected to be 29 million tons.
In January, March futures for No. 5 white sugar on the London exchange fell 8.4% to $466/lb (-10% MoM, -29% YoY) and for No. 11 cane sugar fell 7.6% to $17.8/lb or $392/t (-11% MoM, -33.5% YoY) amid improving weather in Brazil.
Prices are also pressured by forecasts of increased sugar exports from Thailand following the cessation of syrup exports to China. The Cane and Sugar Authority of Thailand estimates that the country’s sugar production in MY 2024/25 will rise 18% year-on-year from 8.77 million tons to 10.35 million tons. Thailand is the third largest producer and second largest exporter of sugar in the world.
According to the Commitment of Traders (COT) weekly report, during January 8-14, funds increased their net short position in sugar in New York by 47005 contracts to a 5-year high of 106045 contracts and in London by 9627 contracts to a 5-year high of 121425 contracts. The funds’ very short price position in sugar futures could lead to a price rally.
Strong rainfall in Brazil over the past 4 months has improved prospects for all crops, including sugarcane, which will boost sugar production. Although amid lower sugar prices, refiners may increase cane processing for ethanol.
In a report published on November 21, the U.S. Ministry of Agriculture predicted that in 2024/25 MY global sugar production will grow by 1.5% y-o-y to a record 186.619 million tons and consumption by 1.2% to a record 179.63 million tons, while ending stocks will decline by 6.1% to 45.427 million tons.