Sugar Prices Gain on Strength in Crude Oil

March NY world sugar #11 (SBH23) on Tuesday closed up +0.49 (+2.81%), and Dec London white sugar #5 (SWZ22) closed up +8.90 (+1.70%).

Sugar prices Tuesday rallied sharply, with NY sugar posting a 1-1/2 week high and London sugar posting a 1-week high.  A rally in crude prices (CLX22) Tuesday to a 2-1/2 week high underpinned sugar prices.  Higher crude prices benefit ethanol and may prompt Brazil's sugar mills to divert more cane crushing toward ethanol production rather than sugar, thus curbing sugar supplies.  

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.

In a bearish factor, StoneX on Sep 18 projected that Brazil Center-South 2023/24 sugar production would 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.

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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