Sugar Slides as India May Allow Additional Sugar Exports

October NY world sugar #11 (SBV22) on Wednesday closed down -0.17 (-0.90%), and Oct London white sugar #5 (SWV22) closed down -3.70 (-0.69%).

Sugar prices Wednesday dropped to 1-week lows and closed moderately lower.  Signs that India may allow additional sugar exports weighed on sugar prices.  A report from Bloomberg Wednesday said that India's government is considering allowing additional export sales of 1.0-1.2 MMT of sugar exports for the year ending September 30 to help India's sugar mills from defaulting on export contracts.  That's on top of the current quota of 10 MMT of sugar exports.

Sugar prices were already on the defensive after Brazil cut gasoline prices.  Petroleo Brasileiro on Tuesday cut gasoline prices at its refineries by -4.9% to 2.86 reais ($0.72) per liter, which may curb ethanol demand in Brazil and is bearish for sugar prices.  

Sugar prices on Monday rallied to 5-week highs on dollar weakness and a jump of more than +5% in crude oil prices.  Strength in crude oil benefits ethanol prices and may prompt Brazil's sugar mills to divert more cane crushing towards ethanol and less towards sugar, thus curbing sugar supplies.

Reduced sugar output in Brazil is bullish for prices.  Unica reported last Tuesday that Brazil 2022/23 Center-South sugar production through June was 9.68 MMT, down -21.6% y/y, with the sucrose content per ton of crushed sugar cane down -4.4% y/y to 127.25 kg per ton.

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.
 

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