By Sugar futures on the Intercontinental Exchange have fallen more than 4% since the start of October as increased production weighed on sentiments.
Prices had tumbled more than 2% on Monday’s session as Brazil’s sugarcane crushing in the country’s Centre-South region during the first half of October rose sharply.
However, sugar futures have recouped some of the losses on Tuesday and were trading 0.9% higher, tracking higher crude oil prices.
At the time of writing, the most active sugar contract on the Intercontinental Exchange was at 22.13 US cents per pound.
Higher crude oil prices lead to increased petrol rates. This encourages drivers to switch to ethanol, which means more of the biofuel is diverted from sugar, limiting the supply of sucrose.
A weaker dollar on Tuesday also aided sugar prices as a stronger greenback makes the commodity more expensive for overseas buyers.
UNICA reports increased cane crushing in Brazil
On Friday, UNICA, the Brazilian Sugarcane and Bioenergy Industry Association, reported that cane crushing in the country’s Centre-South region stood at 33.8 million tons over the first half of October.
Sugarcane crushing during the same period last year was around 32.9 million tons, according to the report.
For the season, the cumulative sugarcane crush as of the middle of October rose 2.4% year-on-year to 538.8 million tons.
Meanwhile, sugar production during the first half of October also increased by 8% on a year-on-year basis to 2.4 million tons, according to the report.
Cumulative sugar production during the season as of mid-October was 35.6 million tons, up nearly 2% from the corresponding period a year ago.
Bumper crop in India adds to bearishness
Expectations of a bumper sugar crop during the 2024-25 (October-September) season have also added to the bearishness in prices.
Optimism that an above-normal monsoon during June-September in India will lead to increased production in the Asian giant. India is the second-largest producer of sugar after Brazil.
The India Meteorological Department said that the country received 934.8 millimeters of rainfall during the monsoon season that ended September 30, 7.6% above the long-period average.
The weather agency also said that this monsoon season, India received the most rainfall in the past four years.
Additionally, India’s Food Minister Pralhad Joshi recently said that the government is considering lifting the ban on sugar exports. He said that the government will take a call once the industry estimates for sugarcane production and the opening balance for sugar for the 2024-25 season are available.
India had indefinitely restricted the exports of sugar in October 2023 to maintain adequate availability in local markets.
More sugar from India could increase supply in global markets in the upcoming months, putting further pressure on prices.
Thailand’s higher sugar output
Additionally, higher output in one of the top sugar-producing countries, Thailand, also weighed on sentiments.
Last week, Thailand’s Office of the Cane and Sugar Board projected that Thailand’s 2024-25 sugar production would jump by 18% on a year-on-year basis to 10.35 million tons, Barchart.com said in a report.
The country produced 8.77 million tons of sugar in the 2023-24 season that ended in April. Thailand is the world’s second-largest sugar exporter in the world.
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