On Friday, March NY world sugar #11 (SBH24) closed with a gain of +0.33 (+1.40%), while March London ICE white sugar #5 (SWH24) closed up +8.50 (+1.30%).
Sugar prices rebounded on Friday, overcoming early losses and settling at a moderate increase. The surge is attributed to concerns over dry conditions in Brazil affecting the upcoming 2024/25 sugar production. StoneX adjusted its estimate for Brazil's 2024/25 Center-South sugarcane production down to 622.1 MMT from the previous 628.8 MMT, citing below-average rains from November to January hindering sugarcane development.
India's diminished sugar production adds to the bullish trend, with the Indian Sugar Mills Association reporting a -3.2% year-on-year decline to 18.7 MMT for the Oct-Jan 31 period of 2023/24. India faces reduced output due to a 6% below-average monsoon rainfall, prompting extended restrictions on sugar exports until further notice. The country's imposition of a 50% export tax on molasses further supports the expectation that export curbs will persist.
Thailand anticipates a significant -36% year-on-year drop in sugar production for 2023/24, reaching a 17-year low of 7 MMT due to a severe drought. The current El Nino weather system compounds concerns, potentially reducing precipitation over the next two years. As the world's third-largest sugar producer and second-largest exporter, Thailand's challenges contribute to tightening global supplies.
Fears of an El Nino disrupting global sugar production add to the bullish factors, as historically, it brings heavy rains to Brazil and drought to India, negatively impacting sugar crop production. A notable surge in Brazil's sugar production, reported by Unica, poses a bearish influence on prices, with a +148.6% year-on-year increase in the first half of January.
USDA's bi-annual report projects a +4.7% year-on-year rise in global 2023/24 sugar production to a record 183.461 MMT. In contrast, ISO forecasts a -1.2% decline to 174.8 MMT, projecting a deficit of -2.12 MMT in the global sugar market for 2023/24. These conflicting estimates add complexity to the overall outlook for sugar prices.
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