Oct NY world sugar #11 (SBV23) on Friday closed -0.33 (-1.37%), and Oct London white sugar #5 (SWV23) closed -12.80 (-1.83%).

Sugar prices Friday closed moderately lower, with NY sugar dropping to a 3-week low.  Sugar prices retreated Friday after India's Food Ministry said the country's sugar stocks were sufficient and stood at 10.8 MMT at the end of July, dampening speculation that India might curtail sugar exports.

A bullish factor for sugar was Friday's +1% rally in crude prices (CLU23) to a 2-1/2 month high.  Higher crude prices benefit ethanol prices and may prompt global sugar mills to divert cane crushing toward ethanol production rather than sugar, thus boosting sugar supplies.  

A supportive factor for sugar was Wednesday's estimate from the Indian Sugar Mills Association (ISMA) that India's 2023/24 sugar production would decline -3.4% y/y to 31.68 MMT.  India is the world's second-largest sugar producer.

In a bearish factor, Unica last Tuesday reported that Brazil Center-South sugar output in the first half of July rose +8.9% y/y to 3.241 MMT and that sugar output in the 2023/24 crop year through mid-July rose +21.9% y/y to 15.470 MMT.  Also, 48.14% of the crushed sugarcane was used for sugar production this year, an increase from 43.54% last year.

Brazil's favorable weather conditions prompted sugar trader Czarnikow to raise its 2023 Center-South sugar production forecast by 500,000 MT to 38.2 MMT.  Also, Datagro on June 29 forecasted that Brazil's Center-South, the main sugar-growing region, will produce a record 39.1 million tons of sugar in the 2023/24 marketing year that began in April, up +16% y/y.

Sugar prices have support from excessive dryness in Thailand, the world's third-largest sugar producer, which may curb the country's sugar production.   So far this year, rainfall in Thailand is well below the same period last year, and the onset of the El Nino weather system could lower precipitation even further over the next two years.  Czarnikow Group predicts Thai sugar production this year could fall for the first time in three years and may drop to the second lowest since 2009/10.

A bullish factor for sugar is concern that an El Nino weather pattern could disrupt global sugar production.   On June 8, the  U.S. Climate Prediction Center said that sea surface temperatures across the equatorial Pacific Ocean had risen 0.5 degrees Celsius above normal, and wind patterns have changed to the point where El Nino criteria have been met.  An El Nino weather pattern typically brings heavy rains to Brazil and drought to India, negatively impacting sugar crop production.  The last time El Nino brought dryness to sugar crops in Asia was in 2015 and 2016, which caused prices to soar.

The USDA, in its bi-annual report released on May 25, projected that global 2023/24 sugar production would climb +6.0% y/y to a record 187.881 MMT and that global 2023/24 human sugar consumption would increase +2.3% y/y to a record 180.045 MMT.  The USDA also forecasted that 2023/24 global sugar ending stocks would fall -15.2% y/y to a 13-year low of 33.455 MMT.

The International Sugar Organization (ISO) on May 22 cut its 2022/23 global sugar production estimate to 177.4 MMT from a previous estimate of 180.4 MMT and cut its 2022/23 global sugar surplus estimate to 852,000 MT from a previous estimate of 4.15 MMT.  On May 4, ISO forecasted a global 2023/24 sugar surplus of +2.1 MMT.

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