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Bearish Trends for Sugar Amid Tariffs and Price Pressures

Sugar prices are facing downward pressure due to tariffs and falling crude oil prices, which could lead to an oversupply in sugar production. However, Brazilian real strength restricts export sales. Analysts are adjusting forecasts, indicating a tightening market ahead.

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AI Rating:   5
Sugar Prices Under Pressure
Sugar prices have recently shown a marked decline with May NY World Sugar #11 down by 2.25% and London ICE White Sugar #5 down by 1.56%. Factors contributing to this downturn include President Trump's tariffs, which have instigated a risk-off sentiment in asset markets, and a significant 7% drop in WTI crude oil prices. Falling crude oil prices typically affect ethanol prices adversely, as it may lead sugar mills to switch from ethanol production to sugar output, thus increasing sugar supply and putting further downward pressure on prices.

Global Production Forecasts
Recent forecasts from various reputable sources indicate concerns regarding global sugar production. The Indian Sugar and Bio-energy Manufacturers Association revised its 2024/25 sugar production forecast downward, highlighting reduced cane yields. Additionally, Unica reported a year-on-year decline in cumulative sugar output in Brazil, crucial for global markets. The International Sugar Organization has also raised its global sugar deficit forecast, emphasizing a tightening market.

Moreover, while some forecasts suggest a potential production increase in Brazil and Thailand, the overall sentiment leans toward reduced supply due to adverse weather conditions affecting crop yields in key producing regions. This reinforces the bearish outlook for sugar prices despite occasional supportive signals from the strengthening Brazilian real, which discourages exports and supports local producers.

Conclusion
The overall outlook for sugar remains cautious, marked by high supply forecasts contrasting with recent demand trends. Investors may need to consider the implications of increased global production against the backdrop of reduced yields in pivotal markets and geopolitical factors affecting sugar trade flows.
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