The sugar quotations on the futures markets have plummeted considerably since last week and the bottom does not seem to have been reached for the time being. Brazil's sugar eases concerns about global availability. Whether that will reach the European spot market remains to be seen.
Also today (Tuesday, June 27), the sugar futures markets immediately turned red at the kick-off in London and New York. The decline in the quotation that started last Thursday (June 22) is mainly due to the world's largest sugar exporter Brazil, which has a good and smooth sugar cane harvest and thus reduces concerns about the availability of sugar. Both sugar prices also fell due to the many sales by speculators who are saying goodbye to their large long positions because the July contract is about to expire. This is now doubly true because of the news from Brazil.
10% drop
It is the first time since February 2020 that both futures markets have experienced such a free fall together. Sugar prices had risen considerably over the past 2 years due to tighter supplies and availability. This spring they once again rose sharply to new heights. The highest sugar quotation in 11 years was thus achieved. The white sugar contract in London has fluctuated at $700 per tonne in recent weeks and has fallen since Thursday to $622, the price at the time of writing (Tuesday afternoon, June 27). The raw sugar contract in New York fell similarly. In mid-June there was still $580 per ton on the price board and on Tuesday afternoon it was $510 per ton. Both futures markets are therefore more than 10%.
Good harvest figures
In recent weeks it has been announced that the Brazilian sugar cane harvest went smoothly and good yields were achieved. Brazilian sugar and ethanol industry group UNICA already announced several figures, including that sugar production through May in 2023/24 had increased by +37,7% year-on-year to 6,972 million tonnes. The sugar cane yield was also 26% higher in May than last year. However, anything can happen in the coming months as the Brazilian sugar cane harvest continues until October and harvests are often lost towards the end, partly due to the weather.
The harvest from Brazil was one of the first really positive messages for the sugar market, after sugar production, exports and stocks decreased in various parts of the world. India, the number 2 in sugar exports, also imposed an export limit on sugar of up to 6 million tons last year to protect the domestic market against high prices. That is more than half less than the 13 million tons of sugar that crossed the border two seasons ago.
European spot market
But Brazilian sugar production does not alleviate all concerns about the availability of sugar in the world. However, concerns about the impact of El Nino weather on the 2023/24 global harvests and lower than previously expected global availability in the 2022/23 season continue to put upward pressure on the sugar market. The spot market for sugar in Europe is certainly a bit different from both futures markets with their contracts. (the average price on the European spot market was €812 per tonne in April). In addition, it is a fact that Europe will again import sugar onto the world market next season instead of exporting it, because its own production will again be lower, partly due to smaller cultivation. Before spot market prices fall sharply, there will first have to be more supply or at lower export prices.