Sugar Follows Crude Oil Prices Lower

March NY world sugar #11 (SBH23) on Wednesday closed down -0.32 (-1.59%), and March London white sugar #5 (SWH23) closed down -9.30 (-1.66%).

Sugar prices Wednesday fell back from 2-week highs and closed moderately lower.  Sugar prices Wednesday tracked crude prices and retreated when WTI crude (CLG23) fell back from a 6-week high and turned lower.  Lower crude prices undercut ethanol and may prompt Brazil's sugar mills to divert more cane crushing toward sugar production rather than ethanol, thus boosting sugar supplies.

Last Monday, NY sugar posted a 2-1/4 month low on an improved sugar supply outlook.  Unica reported last Wednesday that Brazil's 2022/23 sugar production through December rose +4.4% y/y to 33.462 MMT.   Brazil is the biggest sugar producer in the world.  Also, the India Sugar Mills Association (ISMA) reported Tuesday that India's 2022/23 sugar production from Oct-Jan 15 rose +4% y/y to 15.7 MMT.  India is the world's second-largest sugar exporter.  

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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