Sugar Prices See Support from Strength in Crude Oil

October NY world sugar #11 (SBV22) on Wednesday closed up +0.15 (+0.84%), and Oct London white sugar #5 (SWV22) closed down -0.30 (-0.05%).

Sugar prices Wednesday settled mostly higher.  Strength in crude prices Wednesday was supportive for sugar.  WTI crude (CLV22) rallied to a 3-week high Wednesday, which boosts ethanol prices and may prompt Brazil's sugar mills to divert more sugarcane crushing toward ethanol production rather than sugar, thus curbing sugar supplies.  

Conab last Friday cut its estimate for the 2022/23 Brazil sugar crop to 33.9 MMT from an April forecast of 40.3 MMT, citing lower plantings and falling sugar cane yields for the smaller output.

Last Monday, sugar prices rose to 5-week highs on concern about a smaller global supply due in part to the heat wave in Europe, the world's third-largest sugar producer.  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.

Signs of abundant supplies are negative for sugar prices.  India's government, on August 5, 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.

In a bearish factor, Unica reported August 10 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.

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 the USDA's FAS on April 22 for Brazil's 2022/23 sugar production to 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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