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Global Sugar Prices Hit by Trade Fears and Production Estimates

Sugar Prices Decline Amid Concerns Over Production. Recent reports show a significant impact on sugar prices due to global trade tensions, fluctuations in crude oil prices, and production forecasts from major sugar producers.

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AI Rating:   5

Impact of Global Trade Wars: The report indicates that sugar prices have been negatively affected by fears surrounding global trade wars, which has resulted in a risk-off sentiment in the asset markets. This environment can lead to decreased investment in sugar commodities, as investors tend to gravitate towards safer assets during uncertain times.

Crude Oil Prices: A notable factor in the decline of sugar prices is the recent plunge in WTI crude oil prices. As crude oil prices drop, the associated prices of ethanol become restrained. Consequently, sugar mills may shift their focus towards producing more sugar rather than ethanol, which could lead to an increase in sugar supply and further depress sugar prices.

Brazilian Real's Weakness: The fall of the Brazilian real against the dollar has created bearish pressure on sugar prices. A weaker currency makes Brazilian sugar exports more competitive in the global market; however, it also encourages producers to sell more sugar, leading to an over-saturated market, thus pushing prices down.

Production Forecasts: On a more constructive note, reports of lower sugar production estimates in key countries such as India and Brazil are creating some bullish pressure on sugar prices. The Indian Sugar and Bio-energy Manufacturers Association has lowered its production forecast for 2024/25, while Unica has reported a decrease in Brazil's sugar output. An anticipated global sugar deficit according to the International Sugar Organization (ISO) suggests tightening supply and could support prices in the long term.

Fire Damage and Climatic Impact: The report also highlights the negative impact of drought and fires in Brazil, leading to further reductions in estimated sugar production. These natural disasters can significantly affect crop yields and, therefore, supply volumes. However, reports from other countries, such as projected increases in Thailand's sugar production, could counterbalance these developments.

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