After reaching a 6-week low on August 23, March Sugar rallied 3.84 cents (16%) in less than three weeks. The main source of strength has come from south Asia. India’s August rainfall was 36% below average and the lowest for that month since at least 1901. This is expected to cause problems for their 2023/24 and 2024/25 cane crops. Thailand’s upcoming 2023/24 sugar production is expected to decline 18% from 2022/23, which will result in a sharp decline in exports as well.
While India is unlikely to allow any sugar exports during the 2023/24 marketing year, they were already expected to be out of the export market until at least the second quarter of 2024. Indian government officials have said that they have sufficient sugar supply to cover domestic consumption needs if exports are not allowed. However, they may be considering a sugar stocks holding limit on their retailers and wholesalers, which could free up more supply and weigh on sugar prices.
Brazil’s Center-South sugar production was 4 million tonnes ahead of last season’s pace by mid-August. There have been few harvesting and crushing delays, and mills are keeping sugar’s share of crushing close to 50% despite of high crude oil and gasoline prices. This has Brazil heading for a record sugar export total this season, and that should offset a large portion of the expected declines in exports from India and Thailand.
While overall 2023/24 global sugar exports should decline from the 2022/23 season, there is no reason to expect very tight near-term supply in major consuming nations. Friday’s negative key reversal suggests a near term top is in place.
Originally Published September 8, 2023
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