Sugar Climbs as Thailand Delays Sweetness Tax

October NY world sugar #11 (SBV22) on Tuesday closed up +0.50 (+2.83%), and Dec London white sugar #5 (SWZ22) closed down -0.10 (-0.02%).

NY sugar prices Tuesday settled sharply higher after Thailand delayed implementing a tax on sugary beverages from October 1 until April 1.  The delay may keep consumer demand for the beverages strong and boost sugar demand from beverage producers who were otherwise expected to curb production with the implementation of the so-called "sweetness tax."  

Sugar prices were undercut Monday when researcher StoneX projected  Brazil Center-South 2023/24 sugar production would climb +5.7% y/y to 35.2 MMT.  StoneX also projected that global 2023/24 sugar production will climb +3% y/y to 194.4 MMT on rising supplies from Brazil, India, and Thailand.  StoneX also predicted a 2022/23 global sugar surplus of 3.9 MMT.

Last Tuesday, NY sugar posted a 5-week high after Unica reported that Brazil's Center-South sugar crop output in the 2022/23 marketing year through Aug was down -10.5% y/y to 21.77 MMT.

This summer's hot and dry weather in Europe, the world's third-largest sugar producer, caused smaller sugar beet yields and lower sugar production, which is bullish for sugar prices.  Czarnikow Group predicts sugar output in the European Union (EU) and the UK should total 16.4 MMT this year, about 1 MMT lower than last year, which means the EU may have to import more sugar than usual.

Another supportive factor for sugar was the action by Conab on August 19 to 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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