Sugar Prices Extend 2-week Decline on Prospects for Higher Production

March NY world sugar #11 (SBH23) on Friday closed down -0.13 (-0.73%), and Dec London white sugar #5 (SWZ22) closed down -1.60 (-0.31%).

Sugar prices Friday extended the 2-week sell-off, with NY sugar dropping to a 1-month low and London sugar falling to a 2-month low.

Sugar prices were undercut as the Brazilian real (^USDBRL) consolidated just mildly above the 1-month low posted earlier in the week.  The real saw weakness ahead of Sunday's presidential run-off election in Brazil.  A weaker real encourages export sales by Brazilian producers.

Sugar prices remain under pressure from the prospects for increased sugar supply.  The International Sugar Organization (ISO) late Tuesday projected global 2022/23 sugar production would climb +4.5% y/y to a 5-year high of 181.9 MMT.  Also, ISO projected that the 2022/23 global sugar market would be in a surplus of +5.6 MMT.

Higher sugar output in India is bearish for prices.  The Indian Sugar Mills Association last Monday forecasted that India's 2022/23 sugar production (Oct 1-Sep 30) would climb +2% y/y to 36.5 MMT as Indian farmers boosted their planted cane acreage by +5.4% y/y to 5.6 mln hectares.  In 2021/22, India's sugar production rose +2.9% y/y to 35.8 MMT.  India is the world's second-largest sugar producer.  Also, robust sugar exports from India are bearish for prices after India 2021/22 sugar exports jumped +57% y/y to a record 11 MMT.  

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.

Signs of smaller near-term sugar production in Brazil are supportive of prices.  Unica reported Wednesday that Center-South sugar output in the 2022/23 marketing year through mid-October was down -7.3% y/y to 28.163 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.
 

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