Weekly Product Updates

W6 Sugar Update: Global Sugar Prices Edge Higher as Supply Concerns Escalate

Sugar
India
Published Feb 16, 2024
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In W6 in the sugar landscape, sugar futures saw a slight increase in W5, driven by supply concerns in key producing regions like Central-South Brazil and Asia. The most traded raw sugar contract on the NYSE gained 0.17% to USD 0.24/lb, marking a WoW increase of 2.08%, while the first contract in London rose 0.12% to USD 654.40/ mt. Concerns over potential crop damage in Asian, Indian, and Thai crops persisted, while Safras & Mercado lowered its estimate for Central-South Brazil's 2024/25 harvest due to insufficient rainfall. Positive signals emerged from Brazil's strong export performance in Jan-24, but global sugar prices face upward pressure due to supply concerns, moderated by factors like ample supplies from recent harvests and currency fluctuations.

Sugar Futures Edge Up on Supply Concerns, Weekly Gains Accumulate

Sugar futures closed slightly higher on W5 in New York and London, capping a significant weekly gain driven by supply concerns. The global market remains focused on potential shortfalls in key producing regions, particularly Central-South Brazil and Asia. The most traded raw sugar contract on the New York Stock Exchange (NYSE) gained 0.17% to USD 0.24 per pound (lb), with a week-over-week (WoW) increase of 2.08%. The first contract in London rose 0.12% to USD 654.40 per metric ton (mt)

Ongoing anxieties about Asian, Indian, and Thai crops persisted, fueled by concerns about potential crop damage. Concerns over the new harvest in Central-South Brazil intensified, further propelling prices upwards. Safras & Mercado lowered its estimate for the region's 2024/25 harvest by 10 million metric tons (mmt) to 650 mmt, citing insufficient rainfall in sugarcane fields since Dec-23. A Thai mill entity reduced its sugar production estimate for the country by 0.5 mmt to 7.5 mmt. In W4, India, the world's second-largest sugar producer, reported a 3% year-on-year (YoY) decrease in cumulative sugar production, totaling 18.7 mmt.

On the demand side, positive signals emerged from Brazil's strong export performance in January, reaching 3.202 mmt with revenue exceeding USD 1.689 billion. Rising oil prices on the international market positively impacted sugar, as oil influences decisions on plant mix. A weakening US dollar against the Brazilian real (BRL) further supported prices by discouraging exports. In the domestic Brazilian market, sugar prices remained stable at the beginning of Feb-24.

Global Sugar Prices Rise in January, Moderated by Supply and Currency Fluctuations

The Food and Agriculture Organization of the United Nations (FAO) released its Food Price Index report for Jan-24, providing insights into global food price trends. World sugar prices rose 0.8% month-on-month (MoM) on Jan-24, marking a 15.9% YoY increase. This uptick is primarily due to concerns about potential production shortfalls in major producers like Brazil, India, and Thailand. Below-normal rainfall in Brazil raised anxieties about the upcoming sugarcane harvest, with a slow start to the new season and unfavorable production forecasts. However, factors like ample supplies from recent harvests, reduced ethanol profitability in Brazil, and a weaker Brazilian real helped moderate the monthly price increase.

The FAO Food Price Index averaged 118 points on Jan-24, reflecting a 1% decline from the revised Dec-23 level. This decrease is primarily driven by falling cereal and meat prices, offsetting the rise in sugar prices. The potential impact of weather conditions on upcoming harvests in key producer countries will continue to influence global sugar prices. While sugar prices face upward pressure due to supply concerns, overall food prices are forecasted to remain relatively stable in the near term due to countervailing forces in other key commodities.

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