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Global Sugar prices are soaring amid concerns over production from major supplies. Global Sugar futures had dipped near 20 cents per pound mark at the fag-end of the last year- testing lowest level in nearly ten months. However, the trend in the commodity has been positive thereafter. Indian Sugar Mills Association (ISMA) has recently reported that India's 2023/24 sugar output during the October 2023 –mid January 2024 period dropped by 5.3% on year to 14.95 Million Tonnes (MT). Thailand is likely to produce 8-8.5 million tonnes of sugar in the 2023/24 production year, a slide of about 25% from the previous year, according to media reports. This is undercutting the positive production updates from Brazil and the Raw Sugar futures hit 24.60cents per pound in last week of January 2024, hitting highest levels in nearly seven weeks.
The raw sugar futures tumbled in December 2023 after staying well supported in November. Prices plunged after India's food ministry directed local sugar mills to stop using sugar cane juice and syrup to produce ethanol in the 2023/24 supply year to boost sugar reserves. Green Pool Commodity Specialists said this could add 2 MMT of sugar to India's domestic supplies, according to media reports. Meanwhile, leading global Sugar producer Brazil has ramped up its sugar production. Unica has recently reported that Brazil Center-South sugar output in the first half of November rose +30.9% y/y to 2.19 MMT and that sugar output in the 2023/24 crop year through mid-November rose +23.1% y/y to 39.412 MMT. Also, 49.41% of the crushed sugarcane was used for sugar production this year, an increase from 45.97% last year. Meanwhile, Brazil exported 3.7 MMT of sugar in November, marking a new record for the month. Conab raised its 2023/24 Brazil sugar production estimate by +15% to 46.9 MMT from an August estimate of 40.9 MMT.
FAO Sugar Price Index Up Around 16% On Year
The FAO Sugar Price Index averaged 135.3 points in January, up 1.1 points (0.8 percent) from December and 18.5 points (15.9 percent) from its value a year ago. The increase in world sugar prices was mainly driven by concerns over the likely impact of below-average rains in Brazil on sugarcane crops to be harvested from April, coupled with the slow start of the new season and unfavourable production prospects in Thailand and India, two major producing countries. However, large supplies from the recently completed harvest and lower returns from ethanol sales in Brazil, together with the weakening of the Brazilian real against the United States dollar, contributed to limiting the month-on-month increase in world sugar prices. The FAO Sugar Price Index averaged 134.6 points in December, down 26.8 points (16.6 percent) from November, marking the lowest level in the past nine months.
World Sugar Demand Steady
According to a latest update from the Expert Market Research, the global sugar market is an integral component of the agriculture and farming sector, wielding a significant impact on economies, trade relations, and consumer preferences worldwide. As of 2023, the market boasted a consumption volume of approximately 180.31 million tons, signifying its substantial presence in the global commodity landscape. The sugar industry's resilience and ability to adapt to changing dynamics make it an intriguing subject of analysis, especially as it charts a course towards a projected growth of 1% CAGR to attain a volume of 197.19 million tons by 2032.
The sugar market, like many other agricultural commodities, is characterized by its cyclical nature, influenced by factors such as climate conditions, governmental policies, trade agreements, and consumer trends. As of 2023, the global sugar market size had reached a significant milestone with a consumption volume of 180.31 million tons. However, the journey is far from over, as the market is poised for steady growth. The forecast period from 2024 to 2032 anticipates a Compound Annual Growth Rate (CAGR) of 1%, culminating in a projected volume of 197.19 million tons by 2032. This growth, while moderate in comparison to other sectors, reflects the enduring demand for sugar across industries and consumer preferences.
Outlook:
India’s sugar production (including the quantity diverted for ethanol) is estimated to decline 10 per cent to 33.05 million tonnes (mt) in the current season that began from October 1, 2023 from 36.62 mt in the previous season. It is primarily due to likely drop in output in Maharashtra and Karnataka, according to industry body ISMA. In the second advance estimates of sugar production for the 2023-24 season, ISMA said the gross production in Maharashtra is estimated to fall to 9.99 mt from 11.85 mt and in Karnataka to 4.97 mt from 6.58 mt. However, mills in Uttar Pradesh are likely to produce 11.99 mt (11.89 mt). Meanwhile, the consumer price index for Sugar and confectionery stood at 130.50 in December 2023, up 0.30% from November and up 8% from December 2022.
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