Sugar prices have surged significantly, attributed to reduced production estimates in Brazil and India. The Brazilian real’s strength and updated forecasts by the International Sugar Organization contribute to a tightening market scenario. Future production projections indicate both bullish and bearish elements, suggesting volatile sugar pricing.

Sugar prices saw a significant increase, with May New York world sugar closing up 4.06% and May London ICE white sugar rising by 4.30%. This surge is attributed to reduced global production estimates from major producers such as Brazil and India. Recent reports highlighted a 5.6% year-on-year decrease in Brazil’s sugar output through February, totaling 39.822 million metric tons (MMT). In India, forecasts for the 2024/25 sugar production were lowered to 26.4 MMT due to disappointing cane yields.

The appreciation of the Brazilian real, reaching a 3.5-week high against the dollar, contributed to the accelerating gains in sugar prices, disincentivizing exports from Brazilian sugar producers. Additionally, the International Sugar Organization (ISO) has revised its global sugar deficit forecast to -4.88 MMT, indicating a tighter market compared to the previous year’s surplus.

On the other hand, projections for future sugar production suggest some bearish factors. Brazil’s Center-South production is anticipated to rise to 42.4 MMT for the 2025/26 crop year, while traders like Czarnikow predict record output at 43.6 MMT owing to better profitability from sugar production over ethanol. Furthermore, India’s government lifted export restrictions, allowing sugar mills to send 1 MMT abroad this season.

A forecast from Thailand’s Office of the Cane and Sugar Board points to an 18% increase in sugar production for the 2024/25 season, boosting the bearish outlook amidst rising global supply. Drought and heat in Brazil have also impacted sugar production significantly, with reports of up to 5 MMT of sugar cane losses due to crop fires in critical growing regions.

The USDA projects a 1.5% yearly increase in global sugar production to reach 186.619 MMT, while global sugar consumption is also expected to increase. The anticipated decline in global ending stocks further complicates the outlook for sugar prices amid fluctuating supply and demand dynamics.

In summary, the increase in sugar prices is driven by reduced production forecasts from Brazil and India, coupled with a stronger Brazilian real affecting export dynamics. Despite some bearish indicators of future Brazilian production and Indian export permits, the overall market remains constrained with tighter global supplies. This scenario demands close monitoring as it affects sugar pricing trends moving forward.

Original Source: www.nasdaq.com

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