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Sugar Prices Decline Amid Improved Supply Prospects in Brazil and Global Market Dynamics

7 Jan 2025 8:35 am
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MUMBAI, 07 Jan (Commoditiescontrol): Raw sugar prices on the Intercontinental Exchange (ICE) fell on Monday as rains in Brazil, the world’s top sugar producer, alleviated concerns about supply shortages.

Raw sugar futures for March delivery closed at 19.33 cents per pound, down 0.32 cents or 1.66%. London’s March white sugar futures also dropped, settling at $507.10 per metric ton, down $7.10 or 1.4%.

Over the past three months, sugar prices have trended downward, with New York raw sugar hitting a 3.5-month low last Tuesday, and London white sugar reaching a 2.75-year low earlier in the same week. Despite last week’s gains, supported by rising crude oil prices—which hit a 2.5-month high—the market remains under pressure. Higher crude oil prices typically encourage sugar mills to shift production toward ethanol, tightening sugar supplies. However, the impact of this was partially offset by a weaker Brazilian real, which boosted Brazil’s export activity and increased global supply concerns.

India’s sugar output from October to December 2024 fell sharply by 15.5% year-on-year to 9.54 million metric tons (MMT), according to the Indian Sugar and Bio-energy Manufacturers Association (ISM). This decline has raised expectations that India will continue its export restrictions, potentially tightening global supplies.

Meanwhile, Brazil’s 2024/25 sugar production has faced challenges, with a 5.1% year-on-year decline reported in the Center-South region by mid-December, totaling 39.71 MMT. This reduction was attributed to fewer operational mills. However, improved weather conditions in Brazil have brightened prospects for the 2025/26 crop, offering some relief to the market.

Adding to the bearish pressure, Thailand’s sugar production for the 2024/25 season is forecast to rise by 18% year-on-year to 10.35 MMT. Similarly, higher output in China has further bolstered global supply expectations. The International Sugar Organization (ISO) has revised its global sugar deficit projection for the 2024/25 season to 2.51 MMT, down from an earlier estimate of 3.58 MMT. Additionally, the surplus estimate for the 2023/24 season increased to 1.31 MMT, reflecting a more optimistic supply outlook.

Technically, sugar prices remain volatile. Analysts pinpoint support levels at 19.15 and 18.98 cents per pound, with resistance at 19.65 and 19.98 cents. The near-term direction will likely depend on production trends in major producers, ethanol demand, and broader macroeconomic conditions.

The global sugar market continues to navigate a mix of bearish and bullish signals. While increased production in Thailand and China puts downward pressure on prices, supply constraints in India and Brazil, along with strong ethanol demand, provide a counterbalance. In the coming months, traders will closely watch policy decisions, weather conditions, and global economic factors to guide their strategies in this complex and evolving market.

(By Commoditiescontrol Bureau; +91 98201 30172)


       
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