Sugar Prices Slip on Heavy Futures Delivery

March NY world sugar #11 (SBH23) on Monday closed down -0.26 (-1.47%), and Dec London white sugar #5 (SWZ22) closed down -4.50 (-0.85%).

Sugar prices Monday retreated, with NY sugar falling to a 1-1/2 week low.  Signs of weakness in sugar demand weighed on prices Monday after ICE Futures reported raw-sugar delivery to settle the expiration of the October 2022 sugar contract Friday was 14,652 contracts or about 744,000 MT, more than double the amount a year earlier to settle the October 2021 sugar contract.  The high level of deliveries suggested that producers were using futures to unload unwanted supplies of physical sugar.

Another bearish factor for sugar was the projection from StoneX on Sep 18 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.

A bullish factor for sugar is a decline in Brazil's Center-South sugar output.  Unica reported last Tuesday that Center-South sugar output in the 2022/23 marketing year through mid-Sep was down -8.4% y/y to 24.634 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.

This past 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.

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.  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.  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.
 

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