1. Weekly News

Global

Global Sugar Surplus Expected to Reach 1.96 MMT as Brazil Faces Production Challenges

The global sugar market is forecasted to reach a surplus of 1.96 million metric tons (mmt) for the 2024/25 crop year, an increase from an earlier estimate of 1.2 mmt, as mills prioritize sugar over ethanol due to higher margins. Despite this, Brazil's Center-South region, which dominates the global sugar supply, faces production challenges. Sugarcane crushing is forecasted to decrease 6.3% in 2024/25 due to adverse weather and wildfires, with a further decline projected for 2025/26. Mills plans to allocate 51% of cane to sugar production, raising the estimated output to 40.6 mmt in 2025/26.

Brazil

Brazil's Sugar Output Decline and Export Reductions Propel Global Prices to Seven-Month High with Tight Supply Outlook

Brazil’s sugar production is forecasted to decline by 2 mmt in the 2024/25 crop year due to severe drought and extensive wildfires that have affected at least 2.4% of its sugarcane area. As the top global sugar exporter, Brazil’s output issues and India’s reduced exports have pushed global sugar prices to a seven-month high. Production estimates for 2024/25 are down to 39 mmt, with a global surplus revised to 1.96 mmt. Despite higher cane crushing volumes in early Sep-24, lower sugar content has reduced the allocation to sugar production. This tight supply outlook supports higher sugar prices, impacting food ingredient costs amid inflation concerns.

Egypt

Egypt Extends Sugar Export Ban for Six Months Following Surplus Assessment

The Ministry of Investment and Foreign Trade has issued decision No. 68 of 2024, extending the sugar export ban for six months, as outlined in Ministerial Resolution No. 88. Initially issued in 2023, this resolution prohibits the export of all sugar types except surplus quantities, which the Ministry of Supply and Internal Trade and approved by the Ministry of Trade and Industry must assess. From Jan-24 to Aug-24, Egypt's total raw sugar imports reached 700 thousand metric tons (mt). Additionally, the Egyptian market is anticipating the arrival of 320 thousand mt of contracted sugar, with import procedures being finalized for shipment in the coming weeks.

Peru

Peru Issues Draft Regulation on Sugarcane Burning to Protect Health and Promote Sustainable Agriculture

Peru's Ministry of Agrarian Development and Irrigation (Midagri) has issued a draft Supreme Decree under Law No. 31949 to regulate sugarcane burning practices. The new regulation aims to protect public health and foster sustainable agriculture. It requires sugarcane producers to adopt harvesting methods that minimize air pollution, and compliance is mandatory for all producers. Midagri's General Directorate of Agricultural Development and Agroecology is collecting public comments on the regulation until finalization, and submissions can be made via email, the digital parts desk, or in person.

Russia

Russia's Sugar Exchange Sales Surge 56% in 2024 Following New Regulatory Recommendations

In Apr-24, the Federal Antimonopoly Service (FAS) of Russia, in collaboration with the Ministry of Agriculture, recommended that white sugar producers sell at least 10% of their products on the exchange. Following these guidelines, sugar sales on the exchange increased by 56% in the first half of 2024 compared to the same period in 2023, totaling 288.8 thousand mt. The highest volume was recorded in May-24, with 65.9 thousand mt sold, surpassing the recommended 10% threshold for that month. All accredited sugar producers adhere to these recommendations, with 66 sugar factories participating in the market.

2. Weekly Pricing

Weekly Sugar Pricing Important Producers (USD/kg)

Yearly Change in Sugar Pricing Important Producers (W40 2023 to W40 2024)

Brazil

Brazil's refined sugar prices remained stable at USD 0.53 per kilogram (kg) in W40, increasing 6% month-on-month (MoM) from USD 0.50/kg and a 13.11% year-on-year (YoY) decrease from USD 0.61/kg. Sugar prices fell due to forecasts of beneficial rain in Brazil, easing drought concerns. This decline followed a previous rise, with sugar prices up 6% in Sep-24 amid fears of reduced production from dry weather and wildfires. Furthermore, rain forecasts for W41 in Brazil caused sugar futures prices to fall on the New York and London stock exchanges on October 2.

India

India's refined sugar prices decreased to 0.50/kg in W40, marking a 1.96% week-on-week (WoW) drop from USD 0.51/kg. India's monsoon rains this year have been the heaviest since 2020, with rainfall reaching 107.6% of the long-period average from Jun-24 to Sep-24. While excessive rainfall in Sep-24 damaged some summer crops, it improved soil moisture, benefiting winter crops like sugarcane. This increase in moisture is forecasted to lead to higher sugarcane yields, potentially stabilizing sugar prices after last year's drought-related supply constraints. Additionally, the government's recent lifting of export restrictions on rice indicates a broader strategy that may also extend to sugar, allowing for a more favorable pricing environment in the coming months.

United States

In the United States (US), refined sugar prices declined 3.92% WoW, settling at USD 0.49/kg in W40. However, this represents a notable increase of 16.67% MoM from USD 0.42/kg. The pre-pile and early sugar beet harvests across various cooperatives have indicated that the 2024 crop is likely to be average to significantly above average, driven by favorable weather conditions. The vice president of the American Crystal Sugar Company reported that the sugar content and tonnage are both promising, with yields expected to match the record levels achieved in 2023. The hot growing season in the Northwestern states has resulted in a higher-than-average sugar content. While sugar prices have shown recent volatility, the prospects for the 2024 sugar beet crop are optimistic, suggesting that supply may increase in the coming months. This improvement in crop conditions could help stabilize prices in the US sugar market.

Mexico

In Mexico, sugar prices rose to USD 1.36/kg in W40, a 7.09% WoW increase from USD 1.27/kg the previous week and a 3.82% MoM rise from USD 1.31/kg. This upward trend is largely influenced by global supply concerns for the upcoming 2024/25 season, reflected in the Food and Agriculture Organization (FAO) Sugar Price Index, which rose to 125.7 points in Sep-24, a 10.4% increase from Aug-24 but still 22.7% lower than the previous year. The overall rise in sugar prices aligns with increases across other commodities in the FAO Food Price Index, which rose by 2.1% YoY, driven by adverse weather conditions impacting supply amid growing global demand. As such, the Mexican sugar market is forecasted to face continued upward pressure on prices in the near term, driven by these global dynamics.

Pakistan

Refined sugar prices in Pakistan remained stable in W40 at USD 0.47/kg but decreased by 12.96% YoY from USD 0.54/kg. The Federal Cabinet of Pakistan approved the export of an additional 100 thousand mt of sugar, following the Prime Minister's earlier rejection due to concerns over domestic prices and stock levels. This decision adds to a previous Emigration Clearance Certificate (ECC) clearance for 150 thousand mt, totaling 250 thousand mt in approved exports. While government estimates indicate sugar stocks at approximately 4.8 mmt, industry insiders suggest discrepancies may exist due to underreporting. The swift allocation of export quotas among influential sugar mills, coupled with recent tax reforms aimed at addressing stock reporting issues, highlights the complexities surrounding the sugar market in Pakistan and raises concerns about future stability for the upcoming weeks.

3. Actionable Recommendations

Implement Risk Management Strategies

Given the forecasted decline in Brazil's sugar production due to adverse weather conditions and wildfires, stakeholders should implement strong risk management strategies. This includes establishing hedging mechanisms in the futures market to mitigate price volatility. Forward contracts can also help secure pricing and supply commitments, allowing producers and buyers to navigate uncertainties effectively.

Enhance Supply Chain Resilience

To address global supply concerns, businesses should diversify their sugar sourcing strategies. This can involve exploring partnerships with producers in emerging markets and investing in local production initiatives to reduce dependency on traditional suppliers like Brazil and India. Such diversification can strengthen supply chain resilience and minimize disruptions caused by climatic and regulatory factors.

Adopt Sustainable Farming Practices

In light of new regulations in Peru concerning sugarcane burning, sugar producers should adopt sustainable agricultural practices to comply with environmental standards and enhance product quality. Implementing techniques that minimize air pollution and maximize yields—such as integrated pest management and crop rotation—can improve compliance and boost long-term profitability and sustainability in sugar production.

Sources: Tridge, Vinanet, Agro Perú, SpecAgro, Noticias Agricolas, Almalnews, ChiniMandi