Analysis Sugar
Sugar tastes a lot less sweet for growers
The sugar quotations have seen greener times, so to speak. The prices remain under pressure and are on average decreasing. This is partly due to sugar production in Brazil, but also the influence of another major player in the sweetener market.
The sugar quotation in London reached levels above $750 per ton at the end of November 2023, but after 9 months, it has lost about a third of its value. Last Monday (August 6), the price closed at $515.90, the lowest since October 2022 on the white sugar contract. In recent months, the sugar quotation has experienced a free fall and other significant declines, although they often partially recovered afterwards. These corrections were usually lower than the decline, making the sugar market taste less sweet for growers in a short period. However, there is a difference with the European sugar market, with the (fixed) contracts that producers like Tereos and Cosun have with their customers. Still, the futures market for sugar reflects well what is happening in the sugar market. By the way, the raw sugar contract in New York shows the same movement.
Brazil continues to put pressure on the market
Both global and European sugar prices rose sharply until 2023. This had several causes, with disappointing sugar production in various continents at the forefront. Meanwhile, the demand for the sweetener was growing. A bumper harvest followed by a series of broken Brazilian sugar export records shifted the sugar market in a different direction. The South American country is the world's largest sugar producer and by far the largest sugar exporter in the world. Even now, in the new processing season 2024/2025, Brazil is still exporting a large volume. According to the shipping company Cargonova, sugar exports are about 50% higher in the first half of 2024 than the same period last year.
The outlook for the new sugarcane harvest in Brazil is also not bad, as can be deduced from estimates and reports from UNICA, the association of sugarcane processors in Brazil. At the moment, rainfall is slowing down the harvest engine, but this is temporary. Due to less favorable weather, a record yield like a year ago is not expected again, but the cards are stacked for a good sugar production. With high stocks and this production, Brazil continues to supply sugar and puts pressure on the sugar market rather than boosting it.
Outlook for India
Europe, with a share of 15 to 17% of the average sugar production, is not a major producer. Especially when it comes to import and export, our continent has little significance in the world market. Another major player that can make an impact on the sugar market is India. The outlook there - after previous years with subpar sugar production - has improved somewhat for the upcoming season. Growing conditions are more favorable after a relatively dry season thanks to the weather phenomenon El Niño. Moreover, the Indian Meteorological Department (IMD) expects monsoon rains in India to be above average in August and September, which bodes well for sugarcane cultivation. This news has made sugar quotations more relaxed in recent days.
Call to lift export ban
There is still an export ban on sugar in India. It was introduced two years ago and has not been lifted yet. The ban was imposed to protect the domestic market. The sugar industry has been trying to lift this ban for some time, partly to take advantage of higher prices in the world market. Even the current prices are higher than in the domestic Indian market. Recently, the Indian sugar industry has (again) lobbied for permission to export 2 to 3 million tons of sugar in the upcoming season, considering the increase in stocks in the country. With the improved outlook and stocks, there is a good chance that exports will be allowed for the first time in two years.
In Thailand, another major sugar exporter in the world, slightly above-average rainfall for this time of year has been favorable for sugarcane cultivation. In June, there was a drier period which resulted in less favorable sugarcane development, but it seems to be recovering now. The rainfall outlook is also good for the coming months, as in India.
