Sugar Prices Weighed Down by a Slump in Crude Oil

May NY world sugar #11 (SBK23) on Wednesday closed down -0.03 (-0.15%), and May London white sugar #5 (SWK23) closed down -1.90 (-0.33%).

Sugar prices Wednesday gave up early gains and closed slightly lower.  A slump in crude prices (CLJ23) by more than -3% to a 2-week low Wednesday undercut sugar prices.  Weak crude prices undercut ethanol prices and could prompt Brazil's sugar mills to divert more cane crushing toward sugar production rather than ethanol, thus boosting sugar supplies.

Sugar prices early Wednesday had carry-over support from last Friday when India said it wouldn't allow additional sugar exports beyond the 6.1 MMT it has already allowed this season.  The government is concerned that a smaller Indian sugar crop could tighten domestic supplies this year, so it decided not to allow additional exports.  However, sugar prices fell back from their best levels, with London sugar falling into negative territory, after the Indian Sugar Mills Association (ISMA) reported that India's 2022/23 sugar output from Oct-Feb 15 rose +2.8% y/y to 22.84 MMT.  

Sugar prices have rallied sharply over the past month on concern about smaller global sugar production, with NY sugar posting a 6-1/4 nearest-futures high on Feb 10.  On Jan 31, the Indian Sugar Mills Association (ISMA) cut its 2022/23 India sugar production estimate to 34 MMT from an Oct estimate of 36.5 MMT and cut its India 2022/23 sugar export estimate to 6.1 MMT from an Oct forecast of 9 MMT.  In addition, the  ISMA said that it sees India's sugar mills diverting 4.5-5.0 MMT of sugar to ethanol production in 2022/23.  India is the world's second-largest sugar producer.

Reduced sugar production in Europe is a supportive factor for sugar prices.  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.

A bearish factor for sugar is an increase in Thailand's sugar output.  Green Pool Commodity Specialists on Monday said that Thailand's 2023 sugar production reached 6.59 MMT by Feb 8, up nearly +10% from last season, with sugar content in the cane crop at a record high.  Thailand is the world's second-largest sugar exporter.  

Strong Brazil sugar output is bearish for prices after Unica reported last Friday that Brazil's 2022/23 sugar production through January rose +4.5% y/y to 33.500 MMT.  Brazil is the world's largest sugar producer.

A bearish factor for sugar was the Feb 1 projection from the Thai Sugar Mills Corp that Thailand's 2022/23 sugar production would climb +14% y/y to 11.55 MMT.  Likewise, Thailand's 2022/23 sugar exports are projected to increase +17% y/y to 9.05 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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