Sugar Prices Supported by Expectations of Lower Brazil Sugar Production

October NY world sugar #11 (SBV25) today is up +0.06 (+0.37%), and October London ICE white sugar #5 (SWV25) is up +0.50 (+0.10%).

Sugar prices are climbing today on positive carryover from Tuesday when Conab, Brazil's government crop forecasting agency, cut its Brazil 2025/26 production estimate by -3.1% to 44.5 MMT from a previous estimate of 45.9 MMT.

Sugar prices have been under pressure over the past two weeks and posted 2-week lows last Monday on the outlook for Brazil's sugar mills to increase production. Last Monday, Covrig Analytics reported that Brazil's sugar mills are prioritizing sugar production over ethanol, crushing more cane for sugar. This trend is expected to continue as harvesting peaks, driven by drier cane crops that prompt mills to produce more sugar.

Sugar prices have some support from signs of stronger global sugar demand. China's July sugar imports surged +76% to 740,000 MT, and Pakistan recently tendered for 200,000 MT of refined sugar.

On August 12, NY sugar rallied to a 2.5-month high on concerns over weaker cane yields in Brazil. On August 15, Unica reported that Brazil's Center-South sugar output in the second half of July fell by -0.8% y/y to 3,614 MT, and the 2025-26 Center-South sugar output through July fell -7.8% y/y to 19,268 MT. However, the percentage of sugarcane crushed for sugar by Brazil's sugar mills in the second half of July increased to 54.10% from 50.32% the same time last year. Also, Conab said last month that 2024/25 Brazil sugar production fell by -3.4% y/y to 44.118 MMT, citing lower sugarcane yields due to drought and excessive heat.

The outlook for higher sugar exports from India is negative for sugar prices after Bloomberg reported that India may permit local sugar mills to export sugar in the next season, which starts in October, as abundant monsoon rains may produce a bumper sugar crop. India's Meteorological Department reported last Friday that cumulative monsoon rain in India was 650.3 mm as of August 22, or 2% above normal. Also, the Indian Sugar and Bio-energy Manufacturers Association recently said that it will seek permission to export 2 MMT of sugar in 2025/26.

The outlook for higher sugar production in India, the world's second-largest producer, is bearish for prices. On June 2, India's National Federation of Cooperative Sugar Factories projected that India's 2025/26 sugar production would climb +19% y/y to 35 MMT, citing larger planted cane acreage. That would follow a -17.5% y/y decline in India's sugar production in 2024/25 to a 5-year low of 26.2 MMT, according to the Indian Sugar Mills Association (ISMA).

Sugar prices retreated through early July, with NY sugar falling to a 4.25-year low and London sugar sliding to a 4-year low, driven by expectations of a sugar surplus in the 2025/26 season. On June 30, commodities trader Czarnikow projected a 7.5 MMT global sugar surplus for the 2025/26 season, the largest surplus in 8 years. On May 22, the USDA, in its biannual report, projected that global 2025/26 sugar production would increase by +4.7% y/y to a record 189.318 MMT, with global sugar ending stocks at 41.188 MMT, up 7.5% y/y.

The outlook for higher sugar production in Thailand is bearish for sugar prices. On May 2, Thailand's Office of the Cane and Sugar Board reported that Thailand's 2024/25 sugar production rose +14% y/y to 10.00 MMT. Thailand is the world's third-largest sugar producer and the second-largest exporter of sugar.

The International Sugar Organization (ISO) raised its 2024/25 global sugar deficit forecast to a 9-year high of -5.47 MMT on May 15, up from a February forecast of -4.88 MMT. This indicates a tightening market following the 2023/24 global sugar surplus of 1.31 MMT. ISO also cut its 2024/25 global sugar production forecast to 174.8 MMT from a February forecast of 175.5 MMT.

The USDA, in its bi-annual report released May 22, projected that global 2025/26 sugar production would climb +4.7% y/y to a record 189.318 MMT and that global 2025/26 human sugar consumption would increase +1.4% y/y to a record 177.921 MMT. The USDA also forecasted that 2025/26 global sugar ending stocks would climb +7.5% y/y to 41.188 MMT. The USDA's Foreign Agricultural Service (FAS) predicted that Brazil's 2025/26 sugar production would rise +2.3% y/y to a record 44.7 MMT FAS predicted that India's 2025/26 sugar production would rise +25% y/y to 35.3 MMT due to favorable monsoon rains and increased sugar acreage. FAS predicted that Thailand's 2025/26 sugar production will climb +2% y/y to 10.3 MMT.

On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com