Over the first four months of the year, sugar prices rose 48%. While tight near-term global supply of white (processed) sugar provided support, the main factor came from India. As mills ran out of cane to crush, analysts dialed back their forecasts for India’s 2022/23 sugar production. India’s government then announced that they would not allow any more exports of raw sugar over the rest of the 2022/23 season.
After a failed retest of the 2023 high in mid-May, October sugar turned to the downside. This move coincided with the market’s supply focus shifting towards Brazil, which has been the world’s largest sugar producing nation in three of the past four years. Many of Brazil’s Center-South mills started their operations earlier than normal this year to process late-harvested cane from last season.
From April through mid-May, Brazil’s Center-South cane crush was 24% larger than last year. During the same period, sugar’s share of the cane crush was 7.1% above last year, as the decline in gasoline and crude oil prices provided lowered the incentive for ethanol production. This brought overall sugar production to 48% above last year.
Most of Brazil’s production increase will be exported. This could help offset any supply shortfall from India, the EU and China. El Niño could negatively impact India’s 2023/24 output, but India’s government are unlikely to have a full-season embargo on sugar exports, as their production total is expected come above their domestic consumption by several million tonnes. Sugar prices remain overvalued at their current levels and could see a significant decline over the next few months.
—
Originally Published June 9, 2023
Disclosure: The Hightower Report
This report includes information from sources believed to be reliable, but no independent verification has been made, and we do not guarantee its accuracy or completeness. Opinions expressed are subject to change without notice. This report should not be construed as a request to engage in any transaction involving the purchase or sale of a futures contract and/or commodity option thereon. The risk of loss in trading futures contracts or commodity options can be substantial, and investors should carefully consider the inherent risks of such an investment in light of their financial condition. Any reproduction or retransmission of this report without the expressed written consent of The Hightower Report is strictly prohibited. The data contained herein is subject to revision; independent verification is recommended. Any third party opinions regarding this report are not necessarily those of the authors. Due to the volatile nature of futures and options markets, the information contained herein may be outdated upon its release.
Disclosure: Interactive Brokers
Information posted on IBKR Campus that is provided by third-parties does NOT constitute a recommendation that you should contract for the services of that third party. Third-party participants who contribute to IBKR Campus are independent of Interactive Brokers and Interactive Brokers does not make any representations or warranties concerning the services offered, their past or future performance, or the accuracy of the information provided by the third party. Past performance is no guarantee of future results.
This material is from The Hightower Report and is being posted with its permission. The views expressed in this material are solely those of the author and/or The Hightower Report and Interactive Brokers is not endorsing or recommending any investment or trading discussed in the material. This material is not and should not be construed as an offer to buy or sell any security. It should not be construed as research or investment advice or a recommendation to buy, sell or hold any security or commodity. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.
Disclosure: Futures Trading
Futures are not suitable for all investors. The amount you may lose may be greater than your initial investment. Before trading futures, please read the CFTC Risk Disclosure. A copy and additional information are available at ibkr.com.
Join The Conversation
If you have a general question, it may already be covered in our FAQs. If you have an account-specific question or concern, please reach out to Client Services.