Sugar Sees Continued Support from Europe's Drought

October NY world sugar #11 (SBV22) on Friday closed up +0.16 (+0.89%), and Oct London white sugar #5 (SWV22) closed up +14.70 (+2.63%).

Sugar prices are seeing continued support from this summer's hot and dry weather in Europe, the world's third-largest sugar producer.  Forecaster Maxar Technologies said Thursday that above-normal temperatures are expected across Europe next week, aggravating a prolonged drought that has hurt sugar beet yields.  

Smaller sugar supplies from Brazil are supportive of prices.  Last Wednesday, Unica reported that Brazil's Center-South sugar crop output in the 2022/23 marketing year through mid-Aug was down -12.8% y/y to 18.625 MMT.  Also, Conab, on August 19, cut its estimate for the 2022/23 Brazil sugar crop to 33.9 MMT from an April forecast of 40.3 MMT, citing lower plantings and falling sugar cane yields.

In a bearish factor, India's government, on August 5, confirmed that it would allow a further 1.2 MMT of sugar exports for the year ending September 30 to help India's sugar mills from defaulting on export contracts.  That would be on top of the current quota of 10 MMT for a total of 11.2 MMT of sugar exports.

The outlook for larger sugar crop sizes in India and Thailand is bearish for sugar prices.  On April 15, the ISMA raised India's 2021/22 sugar production estimate to 35 MMT from 33.3 MMT, up +12.2% y/y, and said sugar exports would jump to a record 9 MMT.  India is the world's second-largest sugar producer.  The Indian Sugar Mills Association (ISMA) recently reported that India's 2021/22 sugar production from Oct 1-May 15 rose +14.4% y/y to 34.88 MMT.  Meanwhile, Thailand's Office of the Cane & Sugar Board estimated that Thailand would export 7 MMT of sugar this (2021/22) marketing year.  Thailand is the world's second-largest sugar exporter.

A bearish factor for sugar was the projection from the USDA's FAS on April 22 for Brazil's 2022/23 sugar production to climb +2.9% y/y to 36.37 MMT and that 2022/23 Brazil sugar exports would increase by +3.7% y/y to 26.6 MMT.
 

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