An increase in forecasts of world production could turn sugar prices downward

Compared to previous estimates, the International Sugar Organization (ISO) increased the forecast of world sugar production in 2023/24 from 174.8 to 179.9 million tons, and lowered the forecast of the sugar deficit from 2.1 million tons to 335,000 tons. Increase production in Brazil offsets its reduction in Asia. However, so far, prices have not reacted to delays in deliveries from Brazil due to the country's ports being overloaded with soybeans and corn.

It will be recalled that world sugar prices have reached a 12-year high against the background of a possible reduction in supplies as a result of the El Nino weather phenomenon. March futures for white sugar #5 on the London Stock Exchange fell 0.3% to $735/t from Monday (+2% for the month, +53% for the year), and for sugar #11 (cane) in New - York - by 0.4% to $27.2/lb or $600/t (-1% for the month, +38% for the year).

According to Unica, sugar production in Brazil in the 2022/23 MR increased by 22.6% compared to the previous season to 37.215 million tons, in particular in October - by 9.4%. If last year 45.83% of sugar cane was used for sugar production, then in 2022/23 MR it will be 49.39%. Green Pool Commodity experts raised the forecast for sugar production in Brazil in FY 2023/24 by 0.5 million tons to a record 40.5 million tons. However, sugar exports from Brazil in October decreased by 10% compared to September due to port congestion.

Thai Sugar Millers Corp predicts Thailand's 2023/24 sugar production will fall 36% from the previous season to a 17-year low of 7 million tonnes due to severe drought, supporting global prices. The government of the world's third-largest sugar producer and second-largest sugar exporter says it will declare sugar a commodity to control inflation and support food security, prompting a regulatory commission to monitor sugar exports.

The world's second largest sugar producer, India, has started harvesting sugarcane, but the 2023/24 harvest forecast has been lowered due to the lowest amount of monsoon rains in the last 5 years, which fell by 6% less than normal in June-September. The country's authorities plan to limit sugar exports, but the decision will be made after receiving actual production estimates. In FY 2022/23, the government allowed the export of only 6.1 million tons of sugar, compared to a record 11.1 million tons in the 2021/22 season.

Against the backdrop of increased global demand, Ukraine is increasing its sugar exports, and in October it shipped 76,000 tons (compared to 25,000 tons in September and 30,000 tons in October 2022), which was the largest indicator of a calendar month in recent years. Before that, the record was recorded in May 2023 and amounted to 70 thousand tons of sugar.

The El Niño weather phenomenon usually brings rain to Brazil and drought to India, which negatively affects sugar production. The drought it caused in Asia in 2015 and 2016 led to a sharp increase in prices.