Sugar Prices Strengthen on a Rally in Crude Oil

March NY world sugar #11 (SBH23) on Friday closed up +0.22 (+1.19%), and Dec London white sugar #5 (SWZ22) closed up +1.50 (+0.27%).

Sugar prices Friday moved higher for the fourth consecutive session, with London sugar climbing to a 3-1/2 week high.  Strength in crude prices underpinned sugar after crude oil (CLX22) Friday rallied to a 5-week high.  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.  

Another 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, StoneX on September 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.

Robust sugar exports from India are bearish for prices after India 2021/22 sugar exports jumped +57% y/y to a record 11 MMT.  The Indian Sugar Mills Association (ISMA) estimates that India's 2021/22 sugar production (Oct 1-Sep 30) rose +2.9% y/y to 35.9 MMT.

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