Sugar Prices Held Down by Weakness in the Brazilian Real

July NY world sugar #11 (SBN22) on Friday closed down -0.01 (-0.05%), and Aug London white sugar #5 (SWQ22) closed down -7.40 (-1.34%).

Sugar prices Friday extended the week's losses, with NY sugar dropping to a 3-3/4 month low and London sugar falling to a 1-1/4 month low.  Weakness in the Brazilian real (^USDBRL) weighed on sugar prices after the real Friday fell to a 4-1/2 month low against the dollar.  The weaker real encourages export selling by Brazil's sugar producers.

Losses in sugar Friday were limited due to strength in crude oil prices.   Crude oil prices (CLQ22) rose more than +2% Friday, which benefits ethanol prices and may prompt Brazil's sugar mills to divert more cane crushing toward ethanol production rather than sugar, thus curbing sugar supplies.  

The outlook for larger sugar crop sizes in India and Thailand is bearish for sugar prices.  On April 15, the 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.  The Indian Sugar Mills Association (ISMA) recently reported that India's 2021/22 sugar production from Oct 1-May 15 rose +14.4% y/y to 34.88 MMT.  Meanwhile, Thailand's Office of the Cane & Sugar Board estimated that Thailand would export 7 MMT of sugar this (2021/22) marketing year.  Thailand is the world's second-largest sugar exporter.

A bearish factor for sugar was the projection from Conab on April 27 for Brazil 2022/23 sugar production to increase by +15% y/y to 40.3 MMT as the crop recovers from the past season's adverse weather.  Also, the USDA's FAS on April 22 projected Brazil's 2022/23 sugar production would climb +2.9% y/y to 36.37 MMT and that 2022/23 Brazil sugar exports would increase by +3.7% y/y to 26.6 MMT.

In a positive factor for sugar prices, Unica on May 25 reported that Brazil 2022/23 Center-South sugar production through May 15 fell -39.8% y/y to 2.737 MMT.

Big Picture Sugar Market Factors:  World sugar production in 2022/23 (Oct/Sep) will climb +2% y/y to 174.400 MMT from 174.000 MMT in 2021/22 (ISO).  The world sugar surplus in 2022/23 will expand to 2.8 MMT from a surplus of +237,000 MT in 2021/22 (ISO).  Sugar production by Brazil, the world's largest sugar producer, in 2020/21 (Apr/Mar) will climb by +32% y/y to 39.3 MMT from 29.8 MMT in 2019/20, as millers divert 46.4% of cane juice to produce sugar (up from 34.9% in 2019/20) (Conab).  Sugar production from India, the world's second-largest sugar producer, will climb +13% y/y to 31 MMT in 2020/21 due to a good monsoon season (India Sugar Mills Association).  Weather concerns in Brazil are a major bullish factor for sugar prices, with Brazil having experienced its worst drought in 100 years, and as several bouts of frost in Brazil have damaged some sugar cane crops. 

• Sugar Tumbles on Weakness in Crude and Brazilian Real
• Sugar Prices Follow Crude Oil Lower
• NY Sugar Closes Modestly Higher on Strength in Crude Oil
• Sugar Gains on Reports of an India Sugar Export Cap