In W43 in the sugar landscape, the sugar market witnessed significant gains in sugar futures contracts on both the New York and London stock exchanges on October 27, 2023, building on earlier increases. The most actively traded raw sugar maturity on the New York Stock Exchange appreciated by 0.96%, reaching USD 602.08 per metric ton (mt). In London, the primary maturity increased by 0.98% to USD 741.4/mt. Earlier in W43, raw sugar at the North American terminal reached a 12-year high of USD 617.29/mt. This upward trend in the sugar market on international exchanges is driven by position adjustments in response to the recent price decline. Additionally, sugar prices are influenced by developments in the oil market, which directly impact production decisions at plants in the center-south region. Furthermore, the sugar market reflects the depreciation of the United States (US) dollar against the Brazilian real, which may have implications for commodity exports.
The global sugar market is grappling with challenges coming from poor harvests in various countries, even as Brazil achieves record production levels. Experts pointed out that while Brazil has seen a bountiful harvest, other major sugar-producing countries such as India, Thailand, Mexico, and the US have experienced poor harvests. These factors, along with port bottlenecks in Brazil due to record soybean and corn exports, have led to logistical challenges. Analysts noted that logistical issues in Brazil, including extended waiting times at ports, are contributing to a bullish market, propelling sugar prices to 12-year highs on the Intercontinental Exchange (ICE). Rains in the south and southeast regions of Brazil could further exacerbate the logistical problem. Despite the logistical difficulties, the sugar sector in Brazil is thriving due to high prices and record production.
Brazilian sugar mills in the center-south region are taking strategic measures to extend their sugarcane crushing season beyond the customary November period, pushing it into mid-December. This extension aims to optimize the processing of a record harvest of approximately 630 million metric tons (mmt) during the 2023/24 season while capitalizing on current 12-year high sugar prices. However, experts emphasize the importance of avoiding overextension, which could have adverse effects on future crops. Despite the extended harvest period, it is anticipated that there will be sugarcane left for the 2024/25 season, which is expected to be brought forward to Mar-24. This situation aligns with the conventional cycle that traditionally commences in April. This strategic shift aims to reduce the off-season gap and enhance overall operational efficiency. These investments, along with efficiency improvements, are projected to yield an additional 3 to 4 mmt of sugar production. The sector is well-positioned to benefit from robust prices and a positive outlook for the 2024/25 harvest.
Tridge’s analysis indicates that India's sugar industry is grappling with diminished sugar production, driving sugar prices to unprecedented levels. The predicament commenced with adverse weather conditions, as low rainfall in Maharashtra and Karnataka significantly affected sugarcane yields in key regions that contribute over half of India's total sugar output. The Indian Sugar Mills Association (ISMA) expects a 3.3% year-on-year (YoY) decline in sugar production to 31.7 mmt in the 2023/24 season. Consequently, sugar prices in India reached a six-year high of USD 454.80/mt in Sep-23. The price surge and concerns over domestic supply stability prompted the Indian government to extend restrictions on sugar exports beyond Oct-23. The prolonged export ban is expected to raise benchmark sugar prices in the global markets, potentially leading to concerns about food price inflation. However, it may benefit Indian sugar producers, improving their margins and ensuring timely payments to farmers. As stocks decrease and the festive season approaches, further price increases are anticipated, with a continued export ban possible to curb sugar inflation.