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Sugar Prices Retreat as Crude Plunges and the Dollar Strengthens

Barchart - Fri Feb 3, 2023

March NY world sugar #11 (SBH23) on Friday closed down -0.42 (-1.94%), and March London white sugar #5 (SWH23) closed down -15.50 (-2.73%).

Sugar prices Friday retreated, with London sugar falling to a 1-week low.  A plunge of more than -3% in WTI crude oil (CLH23) Friday to a 3-week low weighed on sugar prices.  Weakness in crude prices undercuts ethanol prices and may prompt Brazil's sugar mills to divert more cane crushing toward sugar production rather than ethanol, thus boosting supplies.  Also, a rally in the dollar index (DXY00) Friday to a 3-week high fueled long liquidation pressures in sugar futures.

On Wednesday, NY sugar posted a 6-year high, and London sugar posted a 4-1/2 month high on reduced sugar output and smaller sugar exports from India.  On Tuesday, the India Sugar Mills Association (ISMA) cut its 2022/23 India sugar production estimate to 34 MMT from an Oct estimate of 36.5 MMT and cut its India 2022/23 sugar export estimate to 6.1 MMT from an Oct forecast of 9 MMT.  In addition, the  ISMA said that it sees India's sugar mills diverting 4.5 MMT to 5.0 MMT of sugar to ethanol production in 2022/23.  On Thursday, the ISMA reported that India's 2022/23 sugar output from Oct-Jan was up +3.4% y/y at 19.35 MMT.  India is the world's second-largest sugar producer.  

Sugar prices also have support from last Tuesday when Brazil's state-owned oil company Petrobras raised gasoline prices by more than +7% to distributors.  Strength in gasoline is supportive of ethanol prices, and higher ethanol prices may prompt Brazil's sugar mills to boost ethanol production at the expense of sugar.

Reduced sugar production in Europe is another supportive factor for prices, as that may force European sugar and food manufacturers to import sugar, leading to tighter global supplies.  The European Association of Sugar Manufacturers on Dec 8 forecasted that EU 2022/23 sugar output would fall -7% y/y to 15.5 MMT.

A negative factor for sugar was the Jan 11 report from Unica that showed Brazil's 2022/23 sugar production through December rose +4.4% y/y to 33.462 MMT.   Brazil is the biggest sugar producer in the world.  

In a bearish factor, the Thai Sugar Mills Corp projected Thailand's 2022/23 sugar production would climb +14% y/y to 11.55 MMT.  However, Thailand's 2022/23 sugar exports are expected to decline -17.7% y/y to 9.05 MMT.   Thailand is the world's second-largest sugar exporter.  

Higher sugar output in India last season was bearish for prices.  India's 2021/22  sugar production rose +2.9% y/y to 35.8 MMT.  Also, robust sugar exports from India are bearish for prices after India 2021/22 sugar exports jumped +57% y/y to a record 11 MMT.

In a bearish factor, the International Sugar Organization (ISO) on Nov 22 projected that global 2022/23 sugar production would climb +5.5% y/y to a record high of 182.1 MMT.  Also, ISO projected that the 2022/23 global sugar market would be in a surplus of +6.2 MMT.



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On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.