Sugar prices fell sharply on Monday, pressured by the weakness of the Brazilian real and oil prices. However, there is still an expectation of a global sugar deficit in the 2023/24 season, which could sustain prices at a high level.
Factors that put pressure on prices
The Brazilian real fell to its lowest level in a week against the dollar, encouraging export sales by Brazil's sugar producers. Additionally, crude oil prices fell more than 3% to a 4 - week low, which weighed on ethanol prices and could lead the world's sugar mills to divert more cane crushing to sugar production in instead of ethanol, thus increasing supplies.
Other factors
Another negative factor for sugar prices was last Wednesday's Unica report, which showed that sugar production in the Center-South of Brazil in the first half of October increased by 22% to 2.247 million tons and that the production of Sugar in the 2023/24harvest until mid-October rose 23.6% year on year to 34,862 million tons. Additionally, 49.44% of crushed cane was used for sugar production this year, an increase from 45.63% last year.
Perspectives
Despite the drop on Monday, sugar prices are still at a high level, reflecting the expectation of a global deficit in the 2023/24 season. The International Sugar Organization (ISO) has predicted that global sugar production will fall by 1.2% to 174.8 million tons, and that there will be a global sugar deficit of 2.1 million tons.
Sugar production in India, the second largest global producer, is also expected to fall by 8% in the 2023/24 season, due to reduced rainfall in the main producing states.
Conclusion
Sugar prices fell on Monday, but there is still an expectation of a global deficit in the 2023/24 season, which could sustain prices at a high level.
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