Sugar prices have declined for three consecutive days, reaching two-week lows, driven by a weakened Brazilian real and revised deficit projections. The USDA reported an upcoming sugar production increase while warnings from Alvean suggest potential impacts on Brazilian exports from adverse weather. India’s export allowances and Thailand’s production surge contribute to the fluctuating market scenarios.

Sugar prices have seen a decline over the past three days, reaching their lowest point in two weeks, primarily due to a weakened Brazilian real. The latest forecasts by the C on Thursday indicated a significant global sugar deficit of -4.88 million metric tons (MMT) for the 2024/25 season, a sharp increase from the previous estimate of -2.51 MMT. Concurrently, the International Sugar Organization (ISO) has reduced its global sugar production forecast to 175.5 MMT, down from 179.1 MMT.

In recent trading, sugar prices initially surged to a two-and-a-half-month high, influenced by the strengthening Brazilian real between mid-December and mid-February, which had discouraged sugar exports and led to significant fund short-covering. Support for sugar prices was also drawn from reports indicating a 14% year-on-year decrease in India’s sugar production, totaling 21.98 MMT for the marketing year from October 1 to February 28.

Alvean, the world’s largest sugar trader, provided insights on the insufficient rainfall in Brazil, signaling potential delays in the upcoming April sugar harvest. In a contrasting development, the Indian government announced on January 20 that it would permit sugar mills to export 1 MMT of sugar, relaxing previous export restrictions imposed to secure domestic supplies.

On a bearish note, Thailand’s sugar production is projected to increase by 18% year-on-year to 10.35 MMT for the 2024/25 season, potentially undermining sugar prices. In Brazil, adverse weather conditions last year resulted in significant damage to sugar crops, prompting the government to revise its 2024/25 sugar production estimate downward to 44 MMT. Notably, cumulative sugar output from Brazil’s Center-South area decreased by 5.6% year-on-year to 39.812 MMT by mid-February.

The USDA’s bi-annual report released noted that global sugar production for 2024/25 is expected to rise by 1.5% year-on-year, reaching a record 186.619 MMT. Additionally, global sugar consumption is projected to increase to a record 179.63 MMT. Ending stocks are also anticipated to decline by 6.1% year-on-year to 45.427 MMT, reflecting a tightening global sugar market.

In summary, sugar prices have retreated due to a declining Brazilian real, recent projections of a significant global sugar deficit, and unfavorable weather conditions impacting sugar production. Meanwhile, India’s reduced sugar output and increased production forecasts from Thailand add complexity to the market dynamics. With these factors in play, the outlook for sugar prices remains uncertain.

Original Source: www.tradingview.com

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