Sugar Prices Decline Amid Trade War Fears and Supply Issues

Sugar prices drop as global trade tensions escalate, contributing to reduced demand. Meanwhile, the outlook for sugar production sees varying trends due to weather conditions and currency fluctuations.

Date: 10-04-2025

AI Rating: 5

Market Overview: The latest report indicates that sugar prices are experiencing significant downward pressure, with NY world sugar #11 declining to a five-week low and London ICE white sugar #5 hitting a two-month low. This declining trend has been attributed to a combination of escalating global trade tensions and the corresponding fears of reduced consumer demand for sugar.

Impact of Crude Oil Prices: Another critical takeaway from the report is the decline in WTI crude oil prices, which have now dropped to a four-year low. This creates a bearish environment for sugar prices, as lower oil prices reduce ethanol value and lead sugar mills to divert sugarcane production towards sugar rather than ethanol, thereby increasing supply in the market.

Global Currency Fluctuations: Additionally, the depreciation of the Brazilian real heightens the trend towards bearish sugar prices by facilitating increased export selling by Brazilian sugar producers. As Brazil is a significant player in the global sugar market, such currency fluctuations can considerably impact the overall sugar prices worldwide.

Global Production Trends: On a more supportive note for sugar prices, there are signs of lower global production. Reports indicate that India has cut its sugar production forecast significantly due to lower cane yields, as has Brazil. Specific figures show India's expectations dropped to 26.4 million metric tons (MMT) for the 2024/25 cycle, markedly down from previous estimates, while Brazil's production through mid-March is down 5.3% year-on-year. Furthermore, a forecast by the International Sugar Organization notably revised the 2024/25 global sugar deficit to -4.88 MMT, which could potentially sustain or elevate prices amidst declining supply expectations.

Compounding Factors: The dual pressures of slightly positive expectations for market demand juxtaposed against increasing production prospects from other key producers, such as Thailand's anticipated +18% y/y production increase and India's eased export restrictions, could lead to further uncertainties in sugar pricing. Furthermore, deterioration in production outlooks due to adverse weather conditions in Brazil adds to the complexity of the market.

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