After the sugar market was gripped by fires and drought in key growing areas earlier this month, which sent prices soaring, favourable growing conditions in other regions are providing relief. As a result, sugar prices on the New York and London stock exchanges are now under pressure.
Towards the end of August, sugar prices were on the rise, partly driven by news from Brazil about major fires. Since then, the price has been falling globally. New York was quoted yesterday at $415,13 per tonne, and London was quoted at $526,30 per tonne. That is the lowest point for both quotations since the end of August.
The number of hectares estimated to have been affected by fires in Brazil is increasing. The Brazilian sugar association Unica announced on September 6 that, based on preliminary research, at least 230.000 hectares have been affected in the important production state of Sao Paulo. Of that, more than 130.000 hectares are yet to be harvested. In addition, drought continues to take its toll in Brazil, which is also causing production expectations to be revised downwards.
For 2023/24, the International Sugar Organization ISO has revised the sugar shortage downwards in the August quarterly report. Previously, a global shortage of 2,954 million tons was assumed. This is now a shortage of 0,2 million tons, due to improved sugar production in the main production region of Brazil. The expected shortage for market year 2024/25 is considerably larger than for 2023/24, namely 3,580 million tons.
From India, the much higher rainfall remains favourable for sugarcane cultivation compared to previous years. However, India has no plans to lift export restrictions in the short term. This could further depress the stock on the world market.
World Food Organization sugar index falls
The FAO Sugar Price Index fell by 5,7 points (4,7%) month-on-month to 113,9 points in August. The decline is mainly due to improved production expectations for India and Thailand as a result of rainfall. The relatively low international oil prices also put pressure on sugar prices, as they make it less attractive to produce ethanol from sugar cane. The fires in Brazil were a limiting factor on the decline in the FAO Sugar Price Index.