On Thursday, May NY world sugar #11 (SBK24) closed up +0.29 (+1.33%), and May London ICE white sugar #5 (SWK24) closed up +11.20 (+1.78%), reaching a month high. The bullish trend in international sugar prices has been attributed to several key factors, with Brazil’s weather conditions taking centre stage.
Concerns about excessive dryness in Brazil have fuelled market speculation, as forecasts predict limited rainfall over the next week in Brazil’s Centre-South region. This dry spell raises apprehensions about potential disruptions to sugar production, as Brazil is a major player in the global sugar market.
However, recent data from Unica, the Brazilian sugarcane industry association, paints a somewhat optimistic picture. Unica’s latest report revealed that Brazil’s Centre-South sugar output in the second half of February was 16,000 MT, a significant increase from zero in the corresponding period of the previous year. Additionally, Unica expects 28 mills in the Centre-South region to resume production in the first half of March after their seasonal pause, surpassing the reopening figures from the previous year.
Further influencing market sentiment are projections from StoneX, a global financial services firm, indicating that the surplus of sugar on the global market is set to surpass initial forecasts for the 2023-24 cycle. StoneX attributes this optimistic outlook to the rebound in sugar production in India and Thailand towards the latter stages of their harvest seasons. The increase in production prompts a positive adjustment in estimates, with StoneX projecting a global sugar output surplus of 3.88 million metric tons, up from the earlier forecast of 3.4 million tons announced in February.
The global sugar market continues to navigate through a complex landscape influenced by weather patterns, production dynamics, and demand-supply fundamentals.
Despite the bullish trend in global sugar prices, weak sentiment persists in domestic markets due to low demand. Prices in major markets such as Uttar Pradesh and Kolhapur have experienced declines of Rs 5-10 per quintal. The extension of the crushing season has led to increased sugar production, putting downward pressure on prices. In Muzaffarnagar, M-grade sugar is priced between Rs 3,765 to Rs 3,800 per quintal, while S-grade sugar in Kolhapur is expected to range from Rs 3,415 to Rs 3,450.
