Sugar Sees Support from Crude Oil Rally

October NY world sugar #11 (SBV22) on Thursday closed up +0.21 (+1.15%), and Oct London white sugar #5 (SWV22) closed up +5.40 (+0.98%).

Sugar prices on Thursday saw support from the sharp +2.9% rally in Sep WTI crude oil prices.  Higher crude oil prices are supportive of ethanol prices and may encourage Brazil's sugar producers to crush more sugarcane for ethanol than sugar, thus reducing sugar supplies.

A lack of recent rain in several sugar-growing regions worldwide is supportive of sugar prices.  Maxar Technologies recently said that hot and dry conditions in France and Germany threaten to lower sugar beet yields in the European Union, and that India's sugarcane around the Ganges River Basin received below-normal rainfall in June and July.  

Sugar prices Thursday were undercut by a -1.20% sell-off in the Brazilian real (^USDBRL) versus the dollar, which encourages export sales by Brazil's sugar producers.

In a bearish factor, Unica reported Wednesday that Brazil's Center-South sugar output in the second half of July rose +8.4% y/y to 3.302 MMT.  However, Center-South crop output in the 2022/23 marketing year through the end of July was down -13.0% y/y to 15.974 MMT.

Sugar prices have recently been undercut as India said it would allow additional sugar exports.  India's government last Friday confirmed that it would allow a further 1.2 MMT of sugar exports for the year ending September 30 to help India's sugar mills from defaulting on export contracts.  That would be on top of the current quota of 10 MMT for a total of 11.2 MMT of sugar exports.

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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