Sugar Erases an Early Rally on Increased Brazil Sugar Production

March NY world sugar #11 (SBH23) on Wednesday closed up +0.01 (+0.05%), and March London white sugar #5 (SWH23) closed down -2.10 (-0.38%).

Sugar prices Wednesday rallied to 1-week highs but then gave up most of their gains and settled mixed.  Strength in the Brazilian real was bullish for sugar prices after the real (^USDBRL) Wednesday rallied to a 2-1/2 week high against the dollar.  A stronger real discourages export selling from Brazil's sugar producers.  

Also, a rally of more than +3% in crude oil prices (CLG23) Wednesday to a 1-week high was bullish for sugar.  Higher crude prices benefit ethanol prices and may prompt Brazil's sugar mills to divert more cane crushing toward ethanol production rather than sugar, thus curbing sugar supplies.

Sugar prices gave up most of their gains Wednesday after Unica reported that Brazil's 2022/23 sugar production through December rose +4.4% y/y to 33.462 MMT.

NY sugar early Monday posted a 2-month low on an improved sugar supply outlook.  The India Sugar Mills Association (ISMA) reported last Tuesday that India's 2022/23 sugar production from Oct-Dec rose +3.7% y/y to 12.1 MMT.  India is the world's second-largest sugar exporter.  Also, Conab on Dec 27 hiked its Brazil 2022/23 sugar production estimate to 36.4 MMT from an Aug estimate of 33.9 MMT.

Higher sugar output in India is bearish for prices.  On Oct 24, the 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.

In a bullish factor, StoneX Financial said Dec 14 that due to a delay in Thailand's sugar harvest, projections for Thai sugar exports of 1 MMT to 2 MMT this quarter "will not materialize."  Also, India's Sugar Mills Association (ISMA) said that it sees India's sugar mills diverting 4.5 MMT to 5.0 MMT of sugar to ethanol production in 2022/23.

Reduced sugar production in Europe is another supportive factor for prices, as that may force European sugar and food manufacturers to import sugar, leading to tighter global supplies.  The European Association of Sugar Manufacturers on Dec 8 forecasted that EU 2022/23 sugar output would fall -7% y/y to 15.5 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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