March NY world sugar #11 (SBH23) Friday closed +0.24 (+1.30%), and Dec London white sugar #5 (SWZ22) closed up +3.10 (+0.58%).
Sugar prices Friday closed higher on the sharp rally of more than +4% in crude oil prices, which was sparked by reports that China plans to ease its Covid Zero policy. Â Stronger crude oil prices boost ethanol prices and may prompt Brazil's sugar mills to divert more cane crushing toward ethanol production rather than sugar, thus reducing sugar supplies.
Sugar prices also saw support from Friday's +1.5% rally in the Brazilian real (^USDBRL) to a 2-month high, since a stronger real discourages export selling from Brazil's coffee producers.
In a bullish factor, recent heavy rain in Brazil has hurt sugar processing and delayed port export operations. Â As a result of excessive rain, commodity trader Czarnikow on Monday reduced its forecast for Brazilian 2022/23 sugar production by 100,000 MT from its early-October forecast.
Sugar prices found support on Bloomberg's report on Monday citing unnamed sources as saying that India may limit exports to 9 million MT, lower than the 2021/22 quota of 11.2 million MT. Â While down from the previous marketing year, the 9 million MT export quota would be higher than the 8 million MT quota that the Indian government previously considered due to a larger-than-expected Indian sugar surplus, according to Bloomberg.
A bearish factor for sugar prices is the prospect of increased sugar supply. Â Last Tuesday, the International Sugar Organization (ISO) projected that global 2022/23 sugar production would climb +4.5% y/y to a 5-year high of 181.9 MMT. Â 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. Â Last Monday, the Indian Sugar Mills Association 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. Â In 2021/22, India's sugar production rose +2.9% y/y to 35.8 MMT. Â India is the world's second-largest sugar producer. Â 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. Â 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. Â 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. Â 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. Â 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. Â 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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More Sugar News from Barchart
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