March NY world sugar #11 (SBH22) on Friday closed down -0.33 (-1.80%), and May London white sugar #5 (SWK22) closed down -6.90 (-1.38%).
Sugar prices Friday closed moderately lower, with NY sugar falling to a 2-1/2 week low. Weakness in crude prices Friday prompted long liquidation in sugar futures. On Thursday, NY sugar posted a 1-month high after crude surged to a 7-1/2 year high. Higher crude prices bolster ethanol prices and prompt Brazil’s sugar mills to divert more cane crushing to ethanol production than sugar, thus curbing sugar supplies.
Strength in the Brazilian is bullish for sugar after the Brazilian real (^USDBRL) Wednesday rallied to a 7-3/4 month high against the dollar. A stronger real discourages export selling from Brazil’s sugar producers.
As a negative factor for sugar, larger sugar crop sizes in India and Thailand will offset reduced sugar production in Brazil. The Indian Sugar Mills Association (ISMA) last Thursday reported that India’s 2021/22 Oct-Feb 15 sugar production was up +5.6% y/y at 22.1 MMT. India is the world’s second-largest sugar producer.
Robust sugar export sales from India are bearish for sugar prices. The ISMA said India currently has an opening balance of +8.18 MMT of sugar as of Oct 1 and needs to export about 6 MMT in 2021/22, although that would be 15% y/y less than 7.1 MMT in 2020/21.
Also, the Thailand Office of the Cane & Sugar Board reported Jan 10 that Thailand 2021/22 sugar production during Dec 7-Jan 6 rose +58% y/y to 1.9 MMT. Thailand is the world’s second-largest sugar exporter.
Reduced sugar output in Brazil is bullish for prices after Unica reported Jan 12 that 2021/22 Center-South sugar production Oct through Dec was 32.029 MMT, down -16.14% y/y. Also, the sugar content in the sugarcane crushed fell -1.55 y/y to 142.92 kg/ton from 145.17 kg/ton a year earlier.
Sugar has underlying support from the recent damage to Brazil’s sugar crops from frost and drought. Conab, on Nov 23, cut its Brazil 2021/22 sugar production estimate to 33.9 MMT from an Aug forecast of 36.9 MMT, down -17.9% y/y. Conab projects Brazil’s 2021/22 sugarcane crushing will fall to 525 MMT, down -13% y/y and the lowest in 10 years.
In a supportive factor, the International Sugar Organization (ISO) recently projected a global 2021/22 sugar deficit of -2.55 MMT.
World sugar production in 2021/22 (Oct/Sep) will climb +0.08% y/y to 170.47 MMT from 170.335 MMT in 2020/21 (ISO). The world sugar deficit in 2021/22 will widen to a -2.55 MMT deficit from a -2.02 MMT deficit in 2020/21 (ISO). Sugar production by Brazil, the world’s largest sugar producer, in 2020/21 (Apr/Mar) will climb by +32% y/y to 39.3 MMT from 29.8 MMT in 2019/20, as millers divert 46.4% of cane juice to produce sugar (up from 34.9% in 2019/20) (Conab).
Sugar production from India, the world’s second-largest sugar producer, will climb +13% y/y to 31 MMT in 2020/21 due to a good monsoon season (India Sugar Mills Association). Weather concerns in Brazil are a major bullish factor for sugar prices, with Brazil having experienced its worst drought in 100 years and as several bouts of frost in Brazil have damaged some sugar cane crops.