W28 2024: Sugar Weekly Update

Published 2024년 7월 17일

In W28 in the sugar landscape, global sugar prices increased in Jun-24 due to concerns about sugar production in Brazil, erratic monsoon rains in India, and reduced crop yield forecasts in the EU. In addition, the EU's sugar production is projected to grow by 5% YoY in the 2024/25 season due to increased cultivation in France, Germany, and Romania. Moreover, France's sugar beet production increased by 7% YoY in the 2023/24 season. However, sugar exports declined by 3% YoY due to competition from Ukraine and increased production in the EU. Additionally, the EU has reinstated taxes on Ukrainian sugar from July 1, 2024, to stabilize the local market and protect producers. Furthermore, Brazil's central-south region experienced a significant YoY increase in sugar crushing and production in the second half of Jun-24 due to favorable weather conditions. The quality of the raw material also improved, leading to higher TRS content. In weekly price movements, sugar prices in Brazil and the US increased by 2.08% and 2.38% WoW, respectively, while the prices in India and Pakistan remained unchanged. The prices in Mexico decreased by 1.89% WoW.

1. Weekly News

Global

Global Sugar Price Index Increased in Jun-24

The sugar price index averaged 119.4 points in Jun-24, up 1.9% month-on-month (MoM), according to the Food and Agriculture Organization of the United Nations (FAO). Brazil's lower-than-expected harvest in May-24 raised concerns about the potential effects of prolonged dry weather conditions on sugar production in the coming months. In addition, the erratic monsoon rains in India and a downward revision of crop yield forecasts in the European Union (EU) also contributed to the upward pressure on global sugar prices.

Eurpean Union

EU's Sugar Production Projected to Increase 5% YoY in the 2024/25 Season

According to the European Commission's (EC) first estimate, the EU's sugar production is projected to grow by 5% year-on-year (YoY) in the 2024/25 season despite the potential impact of irregular rainfall and aphid infestations. This increase can be due to a 5.8% YoY increase in the cultivation area, with notable growth in France (7.4% YoY), Germany (1.0% YoY), and Romania (46.8% YoY).

France

Increased Production and Decreased Exports in France

In the 2023/24 season, France's sugar production (beet and cane) increased by 7% YoY to 4.4 million metric tons (mmt). However, exports dropped by 3% YoY to 2.41 mmt. In particular, the exports to the EU dropped by 4% YoY due to increased production in the EU and competition from Ukraine. Ukraine's sugar exports increased significantly after the EU removed customs duties in 2022, negatively affecting France's exports to its traditional markets, such as Spain and Italy.

In response to challenges faced by the EU producers, the EU reinstated taxes on sugar as Ukrainian exports exceeded average volumes imported between mid-2021 and the end of 2023. From July 1, 2024, the EU will tax Ukrainian white sugar exported to the country USD 453 per metric ton (EUR 419/mt) until the end of 2024. This emergency measure aims to stabilize the market and protect local producers from the influx of Ukrainian sugar.

Brazil

Brazil's Central-South Sugar Crushing and Production Surged in Jun-24

Brazil's sugar crushing in the central-south region increased by 12.99% YoY to 48.8 mmt in the second half of Jun-24, compared to 43.19 mmt in 2023. As of July 1, 2024, the cumulative crushing in the 2024/25 season reached 238.4 mmt, marking a 13.27% YoY increase. This rise can be attributed to favorable weather conditions. The quality of the raw material, measured by Total Recoverable Sugars (TRS), reached 139.96 kilograms (kg) of TSR/mt of sugarcane, up from 133.10 kg/mt in Jun-23, although the accumulated ATR remained unchanged.

In addition, Brazil's sugar production totaled 3.25 mmt in the second half of Jun-24, registering a 20.11% YoY increase compared to 2.7 mmt in the previous harvest. Cumulative production rose by 15.7% YoY to 14.20 mmt as of July 1, 2024, with 49.89% of the available raw material directed to sugar production, compared to 49.36% in the same period of the 2023/24 harvest.

2. Weekly Pricing

Weekly Sugar Pricing Important Producers (USD/kg)

* All pricing is wholesale * Varieties: Refined sugar

Yearly Change in Sugar Pricing Important Producers (W28 2023 to W28 2024)

* All pricing is wholesale * Varieties: Refined sugar * Blank spaces on the graph signify data unavailability stemming from factors like missing data, supply unavailability, or seasonality

Brazil

Brazil's wholesale sugar prices increased 2.08% week-on-week (WoW) to USD 0.49/kg in W28 compared to USD 0.48/kg in W27. The price increase can be attributed to concerns over Brazil's sugar beet production in the 2024/25 season, stemming from prolonged dry weather and an anticipated La Niña phenomenon.The market is closely monitoring the production situation in Brazil and India, which will significantly influence global prices.

India

Indian sugar prices remained unchanged at USD 0.49/kg in W28. Despite a projected sugar surplus in the 2023/24 season, India has maintained its sugar export ban due to concerns about global supply. The market closely monitors monsoon rainfall, significantly affecting India's sugar production. Moreover, the uncertainty surrounding Brazil's sugar production has prompted the government to proceed cautiously in its decision-making.

United States

In the United States (US), sugar prices increased by 2.38% WoW to USD 0.43/kg in W28 amidst production uncertainties in Brazil and India, leading to price fluctuations in the future markets. Despite this, the Philippines is set to resume its sugar exports to the US in Aug-24. The United States Trade Representative (USTR) has allowed the Philippines to export 25.3 thousand mt of sugar to the US at a relatively low tariff for the fiscal year 2024 (Oct-23 to Sep-24).

Mexico

Mexico's sugar prices decreased by 1.89% WoW to USD 1.56/kg in W28. Based on a monthly comparison, the price increased by 3.31% MoM, representing the first monthly growth after five consecutive declines. Mexico's sugar production in the 2023/24 season is forecasted to drop slightly to 4.57 mmt compared to 4.74 mmt in the 2022/23 season. However, the anticipated growth in Brazil, China, and the EU is set to offset the decline.

Pakistan

Pakistan’s sugar price remained unchanged at USD 0.5/kg in W28. According to the International Sugar Organization (ISO), the global sugar deficit for the 2023/24 season is forecasted to be 2.95 mmt, a substantial increase from the 0.69 mmt forecasted in Feb-24. Given the global supply shortage, Pakistan will likely maintain its export ban on sugar.

3. Actionable Recommendations

Enhance Irrigation and Diversify Production

Brazil should closely monitor the impact of dry weather conditions on sugar production and invest in irrigation infrastructure to reduce dependency on weather. Diversifying crop production can mitigate risks associated with climate variability while leveraging increased sugar production and high-quality TRS, strengthening export markets. Additionally, maintaining a strategic reserve can help manage potential future shortages.

Optimize Production and Review Export Policies

India should implement advanced weather forecasting systems to manage monsoon impacts on sugar production and invest in agricultural technologies to enhance productivity. Periodically reviewing the sugar export ban in response to global supply-demand dynamics can help capitalize on market opportunities while ensuring domestic supply stability.

Align Production with Market Trends

Mexico should continuously analyze market trends and adjust production strategies to align with global supply-demand changes, enhancing competitiveness. It should explore opportunities for producing and exporting value-added sugar products that can increase revenue streams while strengthening collaborations with other sugar-producing countries can improve production efficiency.

Sources: Agropopular, Portal Do Agronegocio, TerreNet, Unicadata