Sugar Rallies on Weaker Dollar and Higher Crude Oil Prices

March NY world sugar #11 (SBH23) on Tuesday closed up +0.38 (+1.96%), and March London white sugar #5 (SWH23) closed up +6.30 (+1.18%).

Sugar prices Tuesday closed moderately higher.   A sharp sell-off in the dollar index (DXY00) by more than -1% to a 6-month low was bullish for sugar prices.  Also, a jump of more than +3% in crude oil prices (CLF23) Tuesday supported sugar.  Higher crude prices benefit ethanol and prompt Brazil's sugar mills to divert more cane crushing toward ethanol production rather than sugar, thus curbing sugar supplies.

Increased sugar output in Brazil is bearish for sugar prices after Unica reported Monday that Brazil's Center-South sugar output in the 2022/23 marketing year through November rose +2.8% y/y to 32.940 MMT.  

A large long position by commodity funds of London white sugar futures could prompt long liquidation pressure.  Last Friday's weekly Commitment of Trades (COT) report showed funds boosted their net-long London white sugar positions by +1,500 in the week ending Dec 6 to a 3-year high of 32,999 positions.

A supportive factor for sugar is smaller sugar production in Europe, which may force European sugar and food manufacturers to import sugar, leading to tighter global supplies.  The European Association of Sugar Manufacturers Thursday forecasted that EU 2022/23 sugar output will fall -7% y/y to 15.5 MMT.

Sugar prices were undercut when StoneX on Dec 1 boosted its global 2022/23 sugar surplus estimate to 5.2 MMT from a Sep estimate of 3.9 MMT.  StoneX also predicts Brazil's 2023/24 Center South sugar production will climb +5.2% y/y to 35.6 MMT.

Higher sugar output in India is bearish for prices.  On Oct 24, the India Sugar Mills Association ISMA 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.  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.  Last Friday, (ISMA) reported that India's Oct-Nov sugar production rose +1.5% y/y to 4.79 MMT.

In a bearish factor, the International Sugar Organization (ISO) on Nov 22 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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