Strong Brazilian real boosts sugar prices

Strong Brazilian real boosts sugar prices
Strong Brazilian real boosts sugar prices

World sugar #11 for March in New York (SBH26) today rose +0.10 (+0.69%), and white sugar ICE #5 for May in London (SWK26) fell -0.30 (-0.07%).

Sugar prices are mixed today, with New York sugar rising to a two-and-a-half-week high. The strength of the Brazilian real (^USDBRL) supports sugar prices. The real is up +0.33% today, just below the 1.75-year high reached on Monday against the dollar, discouraging export sales from Brazil’s sugar producers.

An excessive short position by funds in New York sugar futures could add fuel to a short-covering rally. Last Friday’s weekly Commitment of Traders (COT) report showed funds increased their short positions in New York sugar futures and options by 14,381 in the week ending February 17 to a record 265,324 net short positions (2006 data).

Signs of lower sugar production in Brazil also support sugar prices, after Unica reported last Wednesday that sugar production in South-Central Brazil in the second half of January fell 36% year-on-year to just 5,000 MT. However, the 2025-26 Central-South cumulative sugar production through January increased +0.9% year-on-year to 40.24 MMT. Furthermore, the proportion of cane crushed for sugar increased to 50.74% in 2025/26 from 48.14% in 2024/25.

On February 12, sugar prices plummeted to 5.25-year lows in near futures on concerns that a global sugar surplus persists. On February 11, analysts at sugar trader Czarnikow said they expect a global sugar surplus of 3.4 MMT in the 2026/27 agricultural year, following a surplus of 8.3 MMT in 2025/26. Additionally, Green Pool Commodity Specialists said on January 29 that they expect a global sugar surplus of 2.74 MMT by 2025/26 and a surplus of 156,000 MT by 2026/27. Meanwhile, StoneX said on February 13 that it expects a global sugar surplus of 2.9 MMT in 2025/26.

Consulting firm Safras & Mercado said on December 23 that Brazil’s sugar production in 2026/27 will fall -3.91% to 41.8 MMT from the expected 43.5 MMT in 2025/26. The firm expects Brazil’s sugar exports in 2026/27 to fall -11% year-on-year to 30 MMT.

The Indian Sugar Mills Association (ISMA) reported on January 19 that India’s sugar production in 2025-26 between October 1 and January 15 increased +22% year-on-year to 15.9 MMT. On November 11, ISMA raised its 2025/26 Indian sugar production estimate to 31 MMT from a previous forecast of 30 MMT, an increase of +18.8% year-on-year, as India experienced its strongest monsoon season in five years. The ISMA also lowered its estimate for sugar used for ethanol production in India to 3.4 MMT from a July forecast of 5 MMT, which could allow India to increase its sugar exports. India is the second largest sugar producer in the world.

Sugar prices are coming down amid prospects of higher sugar exports from India. On February 13, the Indian government approved an additional 500,000 MT of sugar for export for the 2025/26 season, in addition to the 1.5 MMT approved in November. India introduced a quota system for sugar exports in 2022/23 after late rains reduced production and limited domestic supplies.

The prospects for increased sugar production in Thailand are bearish for prices. On October 1, Thai Sugar Millers Corp projected that Thailand’s sugar crop in 2025/26 will increase +5% year-on-year to 10.5 MMT. Thailand is the third largest sugar producer in the world and the second largest exporter.

On the bearish side of sugar, the International Sugar Organization (ISO) on November 17 forecast a sugar surplus of 1.625 million MT in 2025-26, after a deficit of 2.916 million MT in 2024-25. ISO said the surplus is due to increased sugar production in India, Thailand and Pakistan. ISO forecasts a +3.2% year-on-year increase in global sugar production to 181.8 million tonnes in 2025-26. Meanwhile, sugar trader Czarnikow on November 5 raised its global sugar surplus estimate for 2025/26 to 8.7 MMT, +1.2 MMT higher than a September estimate of 7.5 MMT.

The USDA, in its semi-annual report released on December 16, projected that global sugar production in 2025/26 would increase +4.6% year-on-year to a record 189,318 MMT and that global human sugar consumption in 2025/26 would increase +1.4% year-on-year to a record 177,921 MMT. The USDA also forecast that global sugar ending stocks in 2025/26 would fall -2.9% year-on-year to 41.188 million tonnes. The USDA’s Foreign Agricultural Service (FAS) predicted that Brazil’s sugar production in 2025/26 would increase 2.3% year-on-year to a record 44.7 million tons. FAS also predicted that India’s sugar production in 2025/26 would rise 25% year-on-year to 35.25 MMT, driven by favorable monsoon rains and increase in sugar acreage. Additionally, FAS predicted that Thailand’s sugar production in 2025/26 will increase +2% year-on-year to 10.25 MMT.

On the date of publication, Rich Asplund had no (directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article are for informational purposes only. This article was originally published on Barchart.com

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