Sugar Prices Fall Back as Crude Oil Slides

October NY world sugar #11 (SBV22) on Thursday closed down -0.15 (-0.78%), and Oct London white sugar #5 (SWV22) closed down -1.60 (-0.29%).

Sugar prices Thursday posted moderate losses on weakness in crude oil prices.  WTI crude (CLV22) fell more than -1% Thursday, which undercut ethanol prices and may prompt Brazil's sugar mills to divert more sugarcane crushing toward sugar production rather than ethanol, thus boosting sugar supplies.  

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 supportive factor, Unica reported Wednesday that Center-South sugar crop output in the 2022/23 marketing year through mid-Aug was down -12.8% y/y to 18.625 MMT.  Also, 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.

Last Monday, sugar prices rose to a 5-week high 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.

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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