W37: Sugar Update

In W37 in the sugar landscape, on September 11, sugar futures for the Oct-23 contract increased by 0.34% to USD 0.264 per pound (lb) due to the devaluation of the United States (US) dollar, approximately 1%, against the Brazilian real. Persistent concerns about supply issues of Asian origin also contributed to the positive momentum. On September 12, sugar futures continued rising by 1.5% to USD 0.2683/lb, influenced by a 2% gain in oil prices and ongoing supply concerns arising from adverse weather conditions in major Asian producing regions. However, on September 13, sugar prices dropped to USD 0.2654/lb due to profit-taking activities. On September 14, sugar futures rose by over 1% to USD 0.2698/lb, once again supported by gains in oil prices and concerns about supply shortages. On September 15, sugar futures experienced a slight dip of 0.07%, trading at USD 0.2691/lb. This dip was influenced by the relative strength of the Brazilian real against the US dollar, information regarding the sugar supply in India, and movements in oil prices.

For the 2023/24 season, sugar production in Maharashtra, India, is expected to decline by 14% to 9 million metric tons (mmt), down from 10.5 mmt in the previous season. This represents the lowest production level in four years and is attributed to an exceptionally dry August, the driest in over a century. This reduction in production could lead to higher food inflation and discourage New Delhi from allowing sugar exports. This would help maintain global prices, which are already at their highest level in over a decade.

Sugarcane crushing in Minas Gerais, Brazil, reached 51.5 mmt as of September 1, which is 8.1% higher than the amount recorded during the same period in the previous harvest. Similarly, sugar production increased 10.8% year-on-year (YoY) to 3.47 mmt. However, 428 thousand metric tons (mt) of sweetener were produced during the fortnight, which is 2% lower than the 436 thousand mt produced during the same period in the previous harvest. Additionally, in the second half of Aug-23, sugar production in Brazil's south-central region surged by 9.95% YoY to 3.46 mmt, aligned with the initial forecast of 3.44 mmt.

The total sugar production across all regions of Brazil is expected to reach 42.7 mmt in the 2023/24 season, surpassing the initial estimate by 2.3 mmt and the 37 mmt produced in the previous season. This increase is attributed to favorable weather conditions for crop growth. Furthermore, exports are forecasted to reach a record high of 32.2 mmt in 2023/24, surpassing previous estimates by 2.4 mmt and exceeding the 27.1 mmt exported in 2022/23. Brazilian mills are directing a significant portion of sugarcane towards sugar production and reducing ethanol production due to the higher sugar prices.

The Nepali government has decided to import 20 thousand mt of sugar at a reduced tariff of 15% for the upcoming major festivals, a significant reduction from the previous 30%. Furthermore, this decision allows the Food Management and Trading Corporation and the Salt Trading Corporation to import 10 thousand mt of sugar each duty-free. The Ministry of Finance has emphasized that the Nepali market currently has an adequate sugar supply, and these customs concessions are primarily aimed at managing potential fluctuations in market prices. Presently, sugar is available at a wholesale price of USD 0.79 per kilogram (kg) and a market retail price of USD 0.86/kg.

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