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Global Sugar Prices Decline Amid Trade War and Production Cuts

Sugar prices continued to slide on concerns over trade wars and an increase in global supply. Notably, lower sugar production forecasts in key regions may offer some support. Investors should be cautious as market conditions remain volatile.

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AI Rating:   5

Market Overview: Recent analysis indicates that sugar prices have been under pressure, settling at a four-week low due to a combination of factors impacting supply and demand dynamics in the global market. Global trade tensions have created a risk-off sentiment among investors, affecting commodity prices including sugar.

Impact of Crude Oil Prices: The drop in WTI crude oil prices is another significant contributor to the bearish outlook for sugar. With lower oil prices, ethanol becomes less competitive against sugar, which could lead to a higher production of sugar at the expense of ethanol by sugar mills. This potential increase in supply could exert further downward pressure on prices.

Production Forecasts: On a more positive note, there are signs of declining sugar production that could provide support for prices in the medium to long term. For instance, estimates from the Indian Sugar and Bio-energy Manufacturers Association suggest a reduction in sugar production forecasts from 27.27 MMT to 26.4 MMT for 2024/25. Brazil's sugar output is also anticipated to drop by 5.3% compared to the previous year. However, this could be counteracted by increasing production in Thailand and projected surpluses in future years, particularly from Brazil.

Currency Impact: The depreciation of the Brazilian real could further exacerbate sugar prices, as it encourages Brazilian producers to sell sugar abroad at competitive prices. If this trend continues, it could maintain the downward momentum for sugar prices in the international market.

Conclusion: In the short term, the sugar market appears to be affected by bearish influences including trade tensions, fluctuating oil prices, and currency fluctuations. However, the prospect of decreasing production levels in major exporting countries could lead to a balancing effect in the future. Investors should stay agile and monitor ongoing developments closely, as market conditions are likely to remain fluid.

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