This time last year, post the annual Dubai sugar conference, there was a reasonably consistent view that the market had upside potential on supply constraints. In effect, the fundamentals played out for most of the year and the speculative money helped push prices to record highs. This spectacularly unwound at the end of our season, and we are now in the mid to lower end of last year’s trading range.
The views this year are much more two-sided.
The Brazilian crop is obviously the primary focus, and we will soon start to see some results as the dry period for February and March allowed for an early start to harvest. A recent forecast of rain may be viewed as a short-term positive for the market, as it will delay harvest output.
It is early in the 24/25 season and global production and consumption forecasts are very contingent on a few key variables. With Brazil providing around 80% of the global raw sugar trade, the focus is rightly on the expected Brazilian cane tonnage, ATR, and sugar mix, which will be driving the expected change in global raw sugar stocks.
Wilmar is currently forecasting a reduced crop, from the record 665 million tonne crop harvested last year, of more than 600 million tonnes. This, combined with an increase in the sugar-to-ethanol mix of over 50%, results in a sugar make not unlike last year’s record sugar production.
In addition, there has been a supply response in the mid-tier production countries with Russia, Ukraine, and the EU all seeing an increase in sugar beet production, as the economics stack up against a depressed wheat and corn price.
Likewise, China is expected to increase sugar beet production for the same reasons.
By adding half a million tonnes here and there around the globe, the supply total creeps up. As underlying demand or consumption is expected to increase its relentless rise at roughly 1.5-2.0 million tonnes a year, the supply total needs to creep up.
The period of sustained high sugar prices last year did little to erode this momentum.
Currently, we are forecasting a small surplus of stock for 24/25 season which will keep global sugar prices under pressure. This is contrary to many other trade house views around the world who forecast a more bullish outlook.
As noted, it is early days and a small change in one of the key assumptions around Brazilian output can have a significant effect on the market in either direction - so nothing is assured at this point.
Growers will need to have their risk management hat on this year as we are likely to see a more volatile market as opposed to the one-way traffic we enjoyed last year – until we didn’t!
For more information, please get in touch with your local Grower Marketing consultant.
Sugar price movements over the last two years
