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Global Sugar Prices Edge Higher on Short-Covering

11 Jan 2025 9:00 am
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MUMBAI, 11 Jan (Commoditiescontrol): Raw sugar prices on the Intercontinental Exchange (ICE) posted modest gains on Friday, driven by a surge in crude oil prices that spurred short-covering. Stronger crude oil markets tend to benefit ethanol prices, potentially prompting sugar mills worldwide to prioritize ethanol production over sugar, thereby reducing sugar supplies.

The March raw sugar contract rose by 0.12 cents, or 0.6%, to settle at 19.22 cents per pound. This marked a recovery from the previous session's 3.5-month low of 18.84 cents, though the contract still posted a weekly loss of 2.2%. Similarly, London’s March white sugar futures increased by $1.90, or 0.4%, closing at $503.50 per metric ton.

Favorable weather conditions in Brazil have recently pressured sugar prices, but supply concerns stemming from a lower-than-expected crop in India have provided some market support. India’s sugar production dropped sharply by 15.5% year-on-year to 9.54 million metric tons (MMT) between October and December 2024, according to the Indian Sugar and Bio-energy Manufacturers Association (ISMA). The steep decline has fueled speculation that India will continue to impose export restrictions, potentially tightening global sugar supplies.

Conversely, production in other key regions is on the rise. Thailand is expected to see an 18% year-on-year increase in sugar output, reaching 10.35 MMT for the 2024/25 season. China has also reported higher production, which could reduce its dependency on imports. Meanwhile, the International Sugar Organization (ISO) has revised its global sugar deficit forecast for the 2024/25 season to 2.51 MMT, down from an earlier estimate of 3.58 MMT. For the 2023/24 season, the ISO raised its surplus forecast to 1.31 MMT, citing improved supply conditions.

In Brazil, the Centre-South (CS) region—a key sugar-producing hub—reported a 5.1% year-on-year decline in sugar output by mid-December 2024, totaling 39.71 MMT. This was attributed to fewer operational mills during the season. However, favorable weather is expected to boost Brazil's sugarcane harvest for the 2025/26 season, with analysts projecting CS Brazil could process 620 million tons of sugarcane in the 2024/25 crop year.

Globally, U.S. sugar production is set to hit a record high of 9.40 million short tons, according to the USDA’s latest report. These trends highlight a complex landscape of increased output in some regions and significant declines in others.

From a technical perspective, raw sugar prices are expected to find support at 18.96 and 18.70 cents per pound, while resistance levels are pegged at 19.48 and 19.74 cents. Market analysts note that short-term volatility is likely to persist, driven by a mix of bearish and bullish factors.

The global sugar market remains influenced by fluctuating supply conditions, ethanol demand, and macroeconomic variables such as currency movements and crude oil prices. While production growth in Thailand, China, and the U.S. signals improved supply, the decline in Indian and Brazilian output adds an element of uncertainty. Traders are expected to keep a close watch on weather developments, export policies, and broader economic trends as the market navigates its next phase.

(By Commoditiescontrol Bureau; +91 98201 30172)


       
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