Sugar prices are likely to be lower than in 2023 due to higher production prospects.

Sugar prices are likely to be lower in 2024 than last year, and prices are currently at three-week lows but remain above normal. Monthly prices rose 2 percent, but commodities were under pressure on the outlook for production growth. The Trading Economics website says prices have now fallen as strong supply is expected from Brazil, the world’s biggest exporter, offsetting shortages in Asia, particularly India and Thailand. Currently, March raw sugar futures on the InterContinental Exchange of New York are trading at 22.86 cents per pound (€42,175/ton), while March white sugar futures in London are at $652.50/ton (€54,175). Brazil’s COAB estimated Latin American sugarcane production at 678 million tonnes (mt), up 11 percent year-on-year (y-o-y).

Price Forecast

Analysts say sugar prices have also been affected by cooler crude prices, as higher crude prices lead to more cane being diverted to ethanol production in Brazil. BMI, a unit of research firm Fitch Solutions, said: “We maintain our forecast for the first month of 2024 for an average ICE sugar price of 23.5 cents per pound, slightly below the 2023 average of 24.1 cents.

Despite COAB’s assessment, Dutch international banking and financial services group Rabobank said rainfall in Brazil’s sugar belt remains a concern. Rainfall in January was 45 percent below normal. That is 48 percent below normal December precipitation and 23 percent below normal November precipitation. The World Bank said in its commodity review that sugar prices will fall from their peak in 2023 due to the sugar harvest from Brazil.

Impact of El Nino

Sugar prices reached a record in December 2023 on strong Brazilian exports and India’s ban on sugar cane juice for ethanol production, BMI said. “However, prices have since started to rise, continuing the upward trend that dominated most of 2023. Drought conditions in Southeast Asia have affected sugar production in key markets, particularly in India, where sugar factory output fell by 7 percent,” the study explained. This decline raised concerns in the market about the possibility of India expanding its export restrictions. “Sugar prices are up 14.5 percent year-to-date, largely due to this policy change, Unfavorable rain for major sugar exporters this El Nino season and concerns about export restrictions will lead to higher sugar prices in 2024, the World Bank said. “Severe drought could reduce sugar production in Thailand, the world’s second largest exporter, by almost 20 percent in 2024, while drought in India could reduce production by more than 3 percent, he said.

Growing marginal surplus

The world’s largest sugar exporter, Brazil’s record sugar production in the 2023-2024 season will continue to help contain prices, the outlook shows. According to the US Department of Agriculture (USDA), global exports are expected to increase, as Brazil and Thailand offsets lower shipments from India and Pakistan, The USDA forecast in October that global production would increase by 8.2 million tonnes (mt) from last year to 183.5 million tonnes. BMI pegged global production at 182 million tonnes, up 2.2 percent year-on-year.

It is expected that the market will be nicely balanced and the BMI surplus will increase slightly from 0.6 million to 0.8 million tons. This means that supply will remain tight, and further weakening of production expectations in all major markets could lead to a shift in the global production balance to a deficit.

Encourage Brazilian factories

According to the research institute, this is due to a significant increase in production in China, which is expected to grow by 9.7 percent, and in Brazil, which is expected to grow by 9.1 percent. “However, this growth is tempered by somewhat significant declines in other key regions, with Thailand’s output forecast to decline by 16.7 percent and India’s by a more modest 1.6 percent, The World Bank said higher sugar prices are encouraging Brazilian factories to switch to sugar production over ethanol. BMI agreed with the view: “Focusing on Brazil, the world’s leading sugar producer, we see strong sugar production continuing until 2024. BMI is bound for consumption at 180.4 million tons, up 0.8 percent from a year ago. “Global consumption growth is led by India’s projected 5.1 percent consumption growth. Meanwhile, spending by other major consumers is expected to remain stable.

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