Sugar prices continue to decline this week, driven by India's resumption of sugar exports after a two-year hiatus and China’s suspension of Thai sugar syrup. In the meantime, unfavorable weather conditions in Brazil have taken a toll on sugar production.
Sugar prices decreased further this week, following the downward trend observed since September. Overall prices have been at the lowest point since August. On January 20, the sugar price on the Intercontinental Exchange (ICE) in London closed at $474.3 per ton, a 4.5% reduction from last week (January 13). The ICE in New York closed 3.6% lower at $401.68 per ton.
The annual reduction in sugar prices is even more significant compared to last week. Prices dropped 22.5% year-on-year in New York and 28,5% in London. The decline in sugar prices is attributed to increased availability, driven by India allowing sugar exports and China’s ban on Thai syrup exports.
India resumes
sugar exports after a two-year gap
On Monday, January 20,
the Indian government ratified its decision on sugar exports after months of
uncertainty. Under the new context, sugar mills can export 1 million tons of
sugar directly or through merchant exporters until September 2025. India determinated
that, in case of a sugar surplus, exports will be allowed, but only after the
requirements of ethanol blending are satisfied. Under these circumstances, the
Indian government is aiming to support margains for the local sugar mills.
The decision comes as a surprise as the sugar production forecasts are 15.6% lower than last year. Moreover, India’s sugar production for 2024/25 is forecasted to be 7% lower than the local demand. While the Indian sugar entering the market is affecting global sugar prices, it may also put pressure on the Indian market as the sugar production is not able to meet the demand.
However, relevant sugar producers in India see this as a positive development. Vishal Nirani, Director of Nirani Sugars, stated in a LinkedIn post that this decision is paving the way for higher sugar exports in the future after a two-year gap.
Sugar production
in Brazil suffered after droughts and fires
In Brazil, unfavorable weather conditions in the main
production regions are taking a toll on cane and sugar production. The
Brazilian national supply organisation (Conab) has decreased the sugar production
forecast by 2 million tons since droughts, excessive heat, and fires affected the
Brazilian sugarcane harvest.
On January 1, the total production of sugarcane in the country decreased by 4.75% from the previous harvest to almost 1.3 billion tons. In turn, sugar production also decreased by 5.42% to around 79.6 million tons. Sao Paulo, Brazil’s leading state in sugarcane production, suffered the greatest losses during the last harvest due to the extensive damage caused by droughts and fires, with over 80 thousand hectares affected, according to Orplana, the Brazilian Association of Sugarcane Production.
Higher
availability as China’s ban on Thai syrup continues
As China’s ban on sugar
syrup imports from Thailand continues, further pressures on sugar prices stem from an
increase in the availability of sugar in the global market. Due to concerns over hygiene and food safety, the
Chinese government requires the inspection of several processing plants in
Thailand before engaging in negotiations about lifting the suspension.
The expectations for the sugar sector show a low performance for harvest 2024/25 in Q1 of 2025 due to low sugar prices and an overall reduction in production regions. While both India and Brazil are expecting lower sugar production levels for harvest 2024/25, this might play a role in stabilizing sugar prices, according to the ISO (International Sugar Organization).
While considering the challenges faced by the sugar sector in the short term, increases in ethanol blending and expectations for ethanol price hikes maintain a cautious but optimistic perspective for traders in the long term.
