Sugar Rallies on Dollar Weakness and Strength in Crude

May NY world sugar #11 (SBK23) on Thursday closed up +0.26 (+1.27%), and May London white sugar #5 (SWK23) closed up +5.20 (+0.90%).

Sugar prices Thursday posted moderate gains on a weaker dollar.  Also, a rally of more than +1% in WTI crude oil prices  (CLK23) Thursday supported sugar prices.  Higher crude prices benefit ethanol prices and may prompt global sugar mills to divert more sugarcane crushing toward ethanol production rather than sugar, thus curbing sugar supplies.

A bearish factor for sugar was last Friday's report from Unica that showed Brazil's 2022/23 sugar production from Oct-Feb rose +4.5% y/y to 33.504 MMT.  Also, Datagro last Wednesday projected that 2023/24 sugar production in Brazil's Center South would climb by +13.1% y/y to 38.3 MMT.  Brazil is the world's largest sugar producer.

Last Thursday, May NY sugar posted a contract high, and London sugar rose to a 5-3/4 month nearest-futures high, on global weather concerns.  The U.S. Climate Prediction Center said the La Nina weather pattern, which has affected weather patterns over the last three years, has ended and that an El Nino weather pattern has a 61% chance of developing in the second half of this year.  If that El Nino pattern occurs, it could bring heavy rains to Brazil and drought to India, negatively impacting sugar crop production.  

Sugar prices have underlying support from concern about smaller sugar production in India.  The Indian Sugar Mills Association (ISMA) on Jan 31 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 is the prospect of additional sugar exports from India.  Indian Food Minister Singh said last Monday that India could allow another 1 MMT of sugar exports if India's 2022/23 sugar output reaches the government target of 33.6 MMT.  India has already allowed 6 MMT of sugar exports.  The Indian Sugar Mills Association (ISMA) reported Mar 3 that India's 2022/23 sugar output from Oct-Feb 28 rose +1.8% y/y to 25.76 MMT.  

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.  Green Pool Commodity Specialists recently said that Thailand's 2023 sugar production reached 6.59 MMT as of 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.  

The International Sugar Organization (ISO) on Feb 24 raised its 2021/22 global sugar deficit estimate to -2.25 MMT from a November estimate of -1.67 MMT and cut its 2022/23 global sugar surplus estimate to 4.15 MMT from 6.19 MMT.  However, the ISO still projects that global 2022/23 sugar production will climb +4.8% y/y to a record high of 180.4 MMT.  
 

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