Sugar Prices Rally on Asian Supply Concerns

March NY world sugar #11 (SBH23) on Friday closed up +0.32 (+1.62%), and March London white sugar #5 (SWH23) closed up +9.90 (+1.86%).

Sugar prices rallied Friday on continued concern about Asian sugar supplies after recent news that some Indian sugar mills reneged on contracts, forcing buyers to cover positions in the cash market.  In addition, the Indian Sugar Mills Association this week said that India's sugar production from Oct 1 to Nov 15 fell by -4.3% y/y, suggesting disruptions in production.  Sugar prices Friday also saw support from reports that rain in Thailand has delayed the harvest by up to two weeks.

Sugar prices Friday were able to shake off bearish factors, including general worries about global commodity demand and the -8% overall plunge in Dec WTI crude oil prices seen on Thursday and Friday.  Lower crude prices undercut ethanol prices and may prompt Brazil's sugar mills to divert more cane crushing toward sugar production rather than ethanol, thus boosting sugar supplies.  

Sugar prices have carry-over support from last Thursday when Unica reported that Brazil's Center-South sugar output in the 2022/23 marketing year through October was down -3.1% y/y to 30.281 MMT.

Higher sugar output in India is bearish for prices.  On Oct 24, 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.  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, the International Sugar Organization (ISO) Tuesday projected that global 2022/23 sugar production would climb +5.5% y/y to a record high of 182.1 MMT.  Also, ISO projected that the 2022/23 global sugar market would be in a surplus of +6.2 MMT. 
 

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