📖 Your Q2 Earnings Guide: Discover the Stocks ProPicks AI Highlights to Jump Post-EarningsRead more

Raw Cane Sugar: Tight Market Grew to Impending Shortage

Published 03/23/2023, 07:39 AM
Updated 07/09/2023, 06:32 AM

Concerns about lower sugar production in India and Thailand began tangibly supporting sugar prices (India is the world's second-largest sugar producer), while the focus will soon shift to the harvest in Center-South Brazil, which is expected to begin soon and gain pace next month. 

Sugar prices ended $0.23-0.34 higher on Wednesday, extending their recent rally. May New York World Sugar #11 (SBK23) already added +0.32 (+1.56%) at the close on Tuesday, March 21, and May London White Sugar #5 (SWK23) added +9.20 (+1.58%) at the close on the same day.

Sugar prices rose to a near-term 6-year high in February amid signs of shrinking global sugar stocks. The International Sugar Organization (ISO) on February 24 raised its 2021/22 global sugar shortage estimate to -2.25 Mt from -1.67 Mt in November.  However, ISO still forecasts that global sugar production in 2022/23 will rise by 4.8% YoY to 180.4 million tons.

Sugar was negatively affected by Unica's March 3 report, which showed Brazil's 2022/23 sugar production rose by 4.5% YoY to 33.504 Mt in October-February. In addition, Datagro forecast last Wednesday that the production in 2023/24 in the central-south part of Brazil will grow by 13.1% YoY to 38.3 million tons.  Brazil is the world's largest producer of sugar.

Some commodity analysts rushed to cut their forecasts for excess global sugar supply in 2022/23 to just 2.5 MMT (million metric tons) from 5 MMT forecast in January, lending support to the sugar industry, while citing output declines in India due to heavy rains.

The Indian Sugar Mills Association (ISMA) back in end-January downgraded India's 2022/23 sugar production forecast to 34 MMT from 36.5 MMT in October, and lowered India's sugar export forecast for 2022/23 from October's estimate revising it down to 6.1 MMT. Additionally, ISMA said Indian sugar mills will use 4.5-5.0 MMT of sugar for ethanol production in 2022/23. On Friday, ISMA reported that India's 2022/23 sugar production fell -1.1% YoY to 28.2 MMT from 15 October to 15 March. 

On top of that, the decline in sugar production in Europe is supporting sugar prices as well. The European Sugar Producers Association forecast on December 8 that EU sugar production in 2022/23 would fall by 7% YoY to 15.5 million tons.

The only bearish factor for sugar so far is the prospect of additional sugar exports from India.  India's Food Minister Singh said last Monday that India could allow another 1 million tons of sugar exports if India's 2022/23 sugar production hits the government's target of 33.6 million tons. India has already allowed the export of 6 million tons of sugar.

Summary of forecast:

Raw cane sugar is again developing a rather interesting bullish case. Deep downgrade of India’s production forecast, making it unlikely that the country would stick to its 6 million tons of sugar export, along with a major decline of energy-intensive sugar production in Europe, altogether will likely outweigh moderately-positive outlook for the ongoing Brazil’s cane harvest and lay short-to-medium term foundation for this soft commodity’s price strengthening.

Latest comments

Loading next article…
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.