Sugar prices bounce back on forecasts of global sugar shortage

On Thursday, sugar prices on the New York and London Stock Exchanges rose slightly, recovering from a weekly low. Speculative closings appeared in the sugar market after Tropical Research Services announced that the global sugar market in 2023/24 will have a deficit of 6 million tons, which supports sugar prices. In addition, higher oil prices have boosted sugar prices, as higher oil prices are good for ethyl alcohol and could encourage sugar mills to shift more cane to ethyl alcohol production rather than sugar, thereby reducing sugar supplies, Barchart reports.

Strengthening Brazilian real supports sugar prices. Real Madrid rose to a 13 3/4-month high on Thursday. A stronger real is holding back export sales from Brazilian sugar producers.

Sugar prices on Thursday initially fell to a weekly low due to the negative impact of increased sugar production in Brazil. Unica reported on Tuesday that sugar production in Brazil's Central-South region rose 8.9% year-on-year in the first half of July to 3.241 million tonnes and that sugar production in the 2023/24 crop year rose 21.9% by mid-July. year on year to 15.470 million tons.

Favorable weather conditions in Brazil encouraged sugar trader Czarnikow to increase its 2023 Central South sugar production forecast by 500,000 tons to 38.2 million tons. Datagro forecast on June 29 that Brazil's Central-South region, a major sugar-producing region, would produce a record 39.1 million tonnes of sugar in the 2023/24 marketing year that began in April, up 16% from last year.

Some support for sugar prices comes from a drought in Thailand, the world's third largest sugar producer, which could reduce the country's sugar production. Since the beginning of the year, Thailand's rainfall is 28% less than the same period last year, and the onset of the El Niño climate event could further reduce rainfall over the next two years. The Czarnikow Group predicts that Thailand's sugar production this year could decline for the first time in three years and could fall to the second-highest level since 2009/2010.

The threat of El Niño could reduce global sugar production. On June 8, the US Climate Prediction Center said that sea surface temperatures in the Equatorial Pacific region rose 0.5 degrees Celsius above normal and wind patterns changed to the point where El Niño criteria were met. The El Niño event usually brings heavy rains in Brazil and drought in India, negatively affecting sugar production. The last El Niño led to a drought in Asia's sugar plantations in 2015 and 2016, causing prices to soar.

The United States Department of Agriculture (USDA), in its semi-annual report released on May 25, forecast that global sugar production in 2023/24 will grow by 6.0% year on year to a record 187.881 million tonnes and that global sugar consumption in 2023/24 year will increase by 2.3% year on year to a record 180.045 million tons. The USDA also forecast that global sugar stocks at the end of 2023/24 would decline by 15.2% year on year to a 13-year low of 33.455 million tons.

The International Sugar Organization (ISO) on May 22 lowered its estimate of global sugar production in 2022/23 to 177.4 million tons from the previous estimate of 180.4 million tons and lowered its estimate of the global sugar surplus in 2022/23 to 852,000 tons from the previous estimate of 4.15 million tons. On May 4, the ISO forecast a global sugar surplus in 2023/24 of 2.1 million tons.