Sugar Falls as Crude Oil Prices Plunge

May NY world sugar #11 (SBK22) on Tuesday closed down by -0.52 (-2.57%), and Aug London white sugar #5 (SWQ22) closed down -11.70 (-2.13%).

Sugar prices Tuesday dropped to 1-1/2 week lows and closed sharply lower.  Weakness in crude prices (CLK22) Tuesday undercut sugar after crude tumbled by more than -4%.  Weaker crude oil 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 have support from the outlook for Brazil's sugar mills to produce less sugar this month.  Covrig Analytics last Thursday said that Brazil's April sugar production could fall by -30% y/y to below 1.55 MMT as higher profitability of making ethanol relative to sugar prompts Brazil's sugar mills to divert as much as 70% of sugarcane to ethanol production.

In a bullish factor, the International Sugar Organization (ISO) recently cut its global 2021/22 sugar deficit estimate to -1.93 MMT from a November estimate of -2.55 MMT.

Reduced sugar output in Brazil is bullish for prices after Unica reported last Tuesday that 2021/22 Center-South sugar production fro October through March was 32.064 MMT, down -16.6% y/y.  Also, the sugar content in the sugarcane crushed fell by -1.3% y/y to 142.88 kg/ton from 144.71 kg/ton a year earlier.  

The outlook for larger sugar crop sizes in India and Thailand that would offset reduced sugar production in Brazil is bearish for prices.  Last Friday, the Indian Sugar Mills Association (ISMA) raised India's 2021/22 sugar production estimate to 35 MMT from 33.3 MMT, up +12.2% y/y, and said sugar exports would jump to a record 9 MMT.   India is the world's second-largest sugar producer.

Also, the Thailand Office of the Cane & Sugar Board reported on March 22 that Thailand's 2021/22 sugar production from Dec 7-Mar 19 was at 9.6 MMT, and the total Thailand 2021/222 sugar harvest Dec 7-Mar 31 may reach 10 MMT, a 3-year high.  As a result, the Thailand Office of the Cane & Sugar Board expects Thailand to export 7 MMT of sugar this (2021/22) marketing year.  Thailand is the world's second-largest sugar exporter.

Sugar has underlying support from the recent damage to Brazil's sugar crops from frost and drought.  Conab, on November 23, cut its Brazil 2021/22 sugar production estimate to 33.9 MMT from an Aug forecast of 36.9 MMT, down -17.9% y/y.  Conab projects Brazil's 2021/22 sugarcane crushing will fall to 525 MMT, down -13% y/y and the lowest in 10 years.