Sugar markets remain volatile. Prices have fluctuated over the past two weeks. Brazilian sugar exports are declining due to a stronger real. Changing trade policies and unpredictable weather patterns continue to create uncertainty in the global sugar market. In the EU, sugar production in Poland is increasing, although sugar beet growers there face challenges.
Sugar has been very volatile on the Intercontinental Exchange (ICE) recently. In London, sugar closed at $530,8 per tonne on March 10, up 1,14% from a week earlier. During the same period, sugar prices in New York rose 3,46% to $415,57 per tonne. This price increase followed a decline in the previous week.
Sugar prices have fallen significantly compared to last year and are currently down 14,12% in New York and 13,98% in London.
The FAO Sugar Index rose 6,6% from the previous month to 118,5 points. The increase reflects concerns about sugar production due to unfavorable weather conditions in Brazil last year and a possible production decline in India. In addition, the index takes into account the impact of the Brazilian real against the US dollar.
The International Sugar Organization (ISO) has confirmed the outlook for a tight sugar supply. On March 6, the ISO cut its global sugar production forecast by 2,01% to 175,5 million tons. This increased the expected global deficit by 94,4% from the previous forecast of 4,88 million tons. However, recent rainfall in Brazil points to a possible easing of the expected sugar shortage.
Decline in Brazilian exports
Meanwhile, Brazil’s sugar exports appear to be slowing in response to lower prices. According to Brazil’s Foreign Trade Bureau SECEX, average sugar and molasses exports in March were 99.404 tons per day, down 25,7% from last year. The export value of sugar reached $45,99 million, down 34,1% year-on-year.
In February, sugar exports fell by 39,3% compared to the previous year, to a total of 1,83 million tons. The exports were worth $849,8 million, a year-on-year decrease of 46,3%. In both February and March, the fall in the sugar price is reflected in a lower export value.
Strong Brazilian real supports sugar price
A major factor in the decline in Brazil’s sugar exports is the growing strength of the Brazilian real against the US dollar. Despite a weekly decline from a peak on March 4, when $1 was valued at 6,12 reals, the real has risen 16,7% year-on-year to 5,81 reals per $1.
As the real appreciates against the dollar, sugar sales generate less local currency, which means less incentive for sugar mills to sell on the world market. This limits the availability of sugar and drives up prices.
Trade Policy in Brazil
Recent government policies in Brazil have also affected the sugar market. The federal government announced that the 14% import tariff will be abolished, bringing it to 0%. Similar reductions apply to coffee, olive oil, corn and sunflower oil. According to Evandro Gussi, CEO of UNICA, these policies have led to a 10% drop in local sugar prices. The government stated that the measures are intended to reduce food prices for consumers.
The Brazilian government also cut the import tax on ethanol to zero to address inflation and avoid possible U.S. tariffs on steel and aluminum, Reuters reported. While the White House has criticized Brazil's ethanol tariffs as unfair trade practices, the U.S. also normally imposes a tariff on sugar, which is often linked to ethanol.
Growth of Polish sugar production
Meanwhile, the Polish sugar beet harvest has shown positive results, with an 8,7% increase in yield compared to last year, reaching 2,5 million tonnes. However, the Polish sugar industry continues to face challenges, particularly in the areas of beet sugar content, which averaged 16%, the spread of Cercospora leaf spot and aphid infestations. In addition, cultivation is not very profitable for many farmers, as sugar prices are low while costs have not decreased.