May NY world sugar #11 (SBK24) on Tuesday closed down -0.39 (-1.95%), and Aug London ICE white sugar #5 (SWQ24) closed down -10.20 (-1.76%).

Sugar prices posted moderate losses on Tuesday, with NY sugar falling to a 15-month low and London sugar dropping to a 13-month low.  Improving supply prospects are hammering sugar prices.  Last Friday, Unica reported that Brazil's Center-South sugar output in the second half of March was 183,000 MT, up +9% from last year.  Also, Brazilian sugar output so far in the 2023-24 marketing year through March is up +25.7% y/y to 42.425 MMT.  Brazil's sugar mills have ramped up their cane crushing for more sugar and less ethanol.  Mills have crushed 48.87% of total cane for sugar production this year, up from 45.86% last year.

Weakness in the Brazilian real (^USDBRL) is also undercutting sugar prices as the real Tuesday sank to a 1-year low against the dollar.  The weaker real encourages export selling by Brazil's sugar producers.

Also weighing on sugar prices is the outlook for an above-average monsoon in India this year, which could boost India's sugar output.  The India Meteorological Department expects the 2024 (Jun-Sep) monsoon period to be 106% of a long-term average of 87 centimeters.

Another bearish factor for sugar was the Apr 3 report from Thailand's Office of the Cane and Sugar Board that showed Thailand's 2023/24 sugar production from Dec-Mar was 8.75 MMT, above a Feb estimate from the Thai Sugar Millers Corp for sugar production of 7.5 MMT.

A supportive factor for sugar is last Tuesday's report from Bloomberg, which said that India may allow sugar mills to use more sugar to make ethanol.  The Indian government is considering allowing factories to use an additional 800,000 MT of sugar for ethanol production this year.  This move suggests that the government will not soon ease sugar export curbs.  

Sugar also has bearish carryover pressure from Apr 2 when the Indian Sugar and Bioenergy Manufacturers Association reported that India's 2023/24 sugar production from Oct-Mar rose +0.4% y/y to 30.2 MMT as more sugar mills stayed open to crush sugarcane.  As of Mar 31, 322 Indian sugar mills had closed operations, compared with 346 mills closed at the same time last year.

Reduced sugar production in India is a bullish factor for prices.  The 2023 (Jun-Sep) monsoon rain was 6% below average, the poorest monsoon rainfall in 5 years.  In October, India extended restrictions on sugar exports from Oct 31 until further notice in an attempt to maintain adequate domestic supplies.  India allowed mills to export only 6.1 MMT of sugar during the 2022/23 season to Sep 30 after allowing exports of a record 11.1 MMT in the previous season.  India is the second-largest sugar producer in the world.  

On the bearish side for sugar, the Indian Sugar and Bioenergy Manufacturers Association on Mar 13 raised its forecast for India's sugarcane production in the 2023-24 marketing year (that began on Oct 1) by +2.9% to 34 MMT from January's forecast of 33.05 MMT.  Higher sugarcane production likely means higher refined sugar production, depending on how much of that sugarcane is converted into ethanol.

Reduced Thai sugar production is bullish for sugar prices.  Rainfall in Thailand has been below the same period last year, and the current El Nino weather system could continue to depress rainfall in Thailand.  Sugar millers in Thailand are reporting the lowest yield from crushed cane this year in at least 13 years.  Thailand is the world's third-largest sugar producer and the second-largest sugar exporter.

As of April 2024, NOAA predicts the El Nino weather event will end, and the tropical Pacific will transition to neutral conditions, which should benefit weather patterns in South America and Asia and support global sugar crops.  

The USDA, in its bi-annual report released on Nov 23, projected that global 2023/24 sugar production would climb +4.7% y/y to a record 183.461 MMT and that global 2023/24 human sugar consumption would increase +1.2% y/y to a record 178.431 MMT.  The USDA also forecasted that 2023/24 global sugar ending stocks would fall -13.3% y/y to a 13-year low of 33.681 MMT.  The International Sugar Organization (ISO) on Feb 28 raised its 2023/24 global sugar deficit estimate to -689,000 MT from a November estimate of -335,000 MT.
 

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