Sugar Prices Follow Crude Oil Higher

October NY world sugar #11 (SBV22) on Thursday closed up +0.27 (+1.48%), and Dec London white sugar #5 (SWZ22) closed up +15.30 (+2.93%).

Sugar prices Thursday closed moderately higher, with NY sugar posting to a 1-week high.  Thursday's strength in crude oil prices (CLX22) supported moderate gains in sugar.  Higher crude prices benefit ethanol and may prompt Brazil's sugar mills to divert more sugarcane crushing toward ethanol production rather than sugar, thus curbing sugar supplies.

A bearish factor for sugar was Monday's projection from StoneX for Brazil Center-South 2023/24 sugar production to climb +5.7% y/y to 35.2 MMT.  StoneX also projects that global 2023/24 sugar production would climb +3% y/y to 194.4 MMT on rising supplies from Brazil, India, and Thailand.  StoneX predicts 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.

• Cocoa Prices Fall on Dollar Strength and Ample Supplies
• Coffee Moderately Higher on Tight ICE Coffee Inventories
• Beefing Up the Bull with Soybean Meal
• Cocoa Prices Mixed on Dollar Strength and British Pound Weakness