You could say that sugar quotations have seen greener times. Prices remain under pressure and are falling on average. This is partly due to sugar production in Brazil, but another sweetener powerhouse also influences the market.
The sugar quotation in London reached levels above $2023 per tonne at the end of November 750, but has lost about a third of its value after 9 months. Last Monday (August 6), the price closed at $515,90, the lowest since October 2022 on the white sugar contract. In recent months, the sugar price has experienced a free fall and other sharp declines, although these often partly rebound afterwards. These corrections were usually lower than the decrease, which means that in a short period of time the sugar market tastes a lot less sweet for growers. Although there is of course a difference with the European sugar market, with the (permanent) contracts that producers such as Tereos and Cosun have with their customers. Yet the sugar futures market provides a good representation of what is going on in the sugar market. By the way, the raw sugar contract in New York shows the same movement.
Brazil continues to put pressure on the market
Both global and European sugar prices rose sharply until 2023. This had several causes, led by disappointing sugar production in various continents. While the demand for the sweetener actually grew. A top harvest and then a series of broken Brazilian sugar export records gave the sugar market a different direction. The South American country is the world's largest sugar producer and is by far the world's largest sugar exporter. Even now in the new processing season 2024/2025, Brazil is still exporting a lot of volume. According to shipping company Cargonova, sugar exports will be approximately 50% higher in the first half of 2024 than the same period last year.
The prospects for the new sugar cane harvest in Brazil are also not bad, as can be concluded from estimates and reports from UNICA, the association of sugar cane processors in Brazil. At the moment, rainfall is throwing some sand into the harvest engine, but that is temporary. Due to less favorable weather, a record yield is not expected again as a year ago, but the cards for good sugar production have been shuffled. With the high inventories and this production, Brazil continues to supply sugar and puts pressure on the sugar market rather than boosting it.
Outlook India
With a share of 15 to 17% of average sugar production, Europe is not a major producer. Especially when it comes to import and export, our continent has little significance on the world market. Another major power that can make a mark on the sugar market is India. The prospects there - after previous years with substandard sugar production - have improved somewhat for the coming season. Growing conditions are more favorable after a relatively dry season thanks to the El Niño weather phenomenon. Moreover, the Indian Meteorological Department (IMD) expects monsoon rainfall in India to be above average in August and September, which will be good for sugarcane cultivation. This reporting has made sugar prices even more relaxed in recent days.
Call for export ban to be lifted
However, there is still an export ban on the sweetener in India. This was introduced two years ago and has still not been lifted. The ban was introduced to protect the domestic market. The sugar industry has been trying to lift this ban for a long time, partly to benefit from higher prices on the world market. Current prices are also higher than on the internal Indian market. Recently, the Indian sugar industry has (again) lobbied for permission to export 2 to 3 million tons of sugar in the coming season, given the increase in stocks in the country. With the improved prospects and stocks, there is a good chance that exports will be allowed again for the first time in two years.
In Thailand, another major sugar exporter in the world, slightly above-average rainfall for the time of year has also been favorable for sugar cane cultivation. In June there was a drier period, which made sugar cane development less favorable, but the cultivation now seems to be recovering from this. The precipitation forecast there is also good for the coming months, just like in India.