Sugar Prices: Likely to come under pressure this season on better EU, Thai cane crops
Sugar prices will likely come under pressure during the current season to September as the market is expected to witness about four million tonnes (mt) surplus, say analysts. They are currently ruling near three-month lows.
Dutch multinational and financial services firm Rabobank expects a tiny surplus in sugar during the 2024-25 season. It has projected a slightly bullish trend in sugar. According to the US Department of Agriculture (USDA), global sugar output is expected to increase by 1.5 per cent in the 2024-25 season, though demand is projected to rise by 1.2 per cent to 179.63 mt.
ING Think, the economic and financial analysis wing of another Dutch multinational financial services ING, said recent rains in the Center-South region (CS) of Brazil have eased concerns over the next crop.
Concerns over Brazil crop
“However, the expected size of the surplus has fallen as we have moved through the year, with the global market now expected to see a surplus of a little over 4 million tonnes (mt) in 2024-25,” it said in its Commodity Outlook 2025.
Research agency BMI, a unit of Fitch Solutions, has forecast a year-on-year decline of one per cent in front-month InterContinental Exchange-listed sugar prices.
ING Think said despite expectations for a global surplus in the sugar market in the 2024-25 season (October-September), sugar prices have held up relatively well.
“This has been largely due to concerns over the CS Brazil crop where drought conditions and fires in cane fields raised risks not only for the 2024-25 crop but also the 2025/26 crop,” it said.
ISO cuts deficit
Sugar prices have dropped 5 per cent year-to-date with the fall coming primarily in the past month (9%). Currently, raw sugar March contracts are quoted at 19.2 cents a pound (over ₹36,400 a tonne) on InterContinental Exchange (ICE), while London white sugar prices are ruling at $516.50 (₹44,100) a tonne.
The commodity’s rates have headed south after the International Sugar Organization cut its 2024-25 global sugar deficit forecast. It also raised its 2023-24 global surplus estimate to 1.31 mt from its earlier projection of 200,000 tonnes.
In addition, Brazil’s crushing of sugarcane in the second half of November reached was higher at 20.35 mt – higher than expectations. Sugar supplies will be boosted by an 18 per cent higher production in Thailand at 18 mt.
“ While there are clear supply risks which leave uncertainty over the expected surplus, we believe stronger Thai, EU and potentially Indian production should cap upside in prices. We would expect the market to come under renewed pressure once the CS Brazil 2025-26 harvest gets underway,” said ING Think.
Indian exports impact
The ING arm said, “If India allows exports over the course of 2025 (which could happen in the first quarter), it will provide further downside to prices. As a result, we expect No.11 raw sugar (on ICE) to average USc20.30/lb over the course of 2025.”
BMI said it is projecting a drawdown in stocks of soft commodities, including sugar, which is indicative of a more fragile market “exposed to poor harvests”.
ING Think said the CS Brazil region is expected to crush around 595 mt of sugarcane, yielding over 39 mt of sugar. The sugar mix this season has been more than 48 per cent, with sugar prices remaining at a healthy premium to domestic hydrous ethanol prices.
“This is down on last year when almost 655 mt of cane was crushed and more than 42.4 mt of sugar produced,” it said.
Premium to ethanol
The Dutch financial services firm arm said with the 2024-25 CS Brazil crop largely complete, attention will turn to the 2025-26 crop, which officially starts in April.
“There is a fair amount of uncertainty over how this crop will develop due to the fires seen in cane fields this year. Large parts of CS Brazil have suffered from drought, although the region has had rain more recently as we head into the rainy season,” it said.
If normal weather conditions continue, this should allow agricultural yields to recover and see the industry crushing more cane than in the 2024-25 harvest. “Furthermore, sugar continues to trade at a healthy premium to hydrous ethanol in Brazil, so mills should continue to push for a maximum sugar mix,” said ING Think.
Lower Indian output?
India’s Centrum Broking Limited said overall sugar production in the 2024-25 season is expected to be lower at 28 mt against 31.9 mt last season due to the removal of the cap on the diversion of sugarcane for ethanol production.
“We maintain a positive outlook on the sugar sector, supported by expected favourable developments, such as an increase in the minimum support price to ₹35/kg (up from ₹31/kg currently) and a 5-6 per cent rise (industry experts vs our expectations of 3-5 per cent) in ethanol procurement prices for ESY25,” it said.