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Sugar Prices Slide Amid Production Concerns and Dollar Rally

Sugar prices dip as the dollar index rallies, causing long liquidation. A recent report indicates tighter global supply, with Brazil and India both revising down production forecasts significantly.

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AI Rating:   5

Market Overview: The report highlights the current downturn in sugar prices, specifically for NY world sugar #11 and London ICE white sugar #5, attributed to a strong dollar index causing liquidation. The dollar's rise has historically pressured commodity prices, including sugar.

Production Forecasts: Notably, the report mentions a significant decrease in sugar production forecasts from Brazil and India. Brazil's cumulative output through February declined by -5.6% year-on-year, while India cut its forecast from 27.27 MMT to 26.4 MMT due to lower cane yields. This reduction in expected production may create upward pressure on prices if demand remains stable or increases.

Global Sugar Deficit: The International Sugar Organization's revision of the global sugar deficit forecast from -2.51 MMT to -4.88 MMT signals a tighter market situation compared to previous surpluses. This tightening may provide some support to sugar prices unless the increased production from other regions, like Thailand, offsets this deficit.

Production Comparisons: The bearish outlook from Datagro on Brazil’s production potentially climbing in 2025/26, alongside India’s permission for an additional 1 MMT of sugar exports, introduces conflicting signals in the sugar market. The bearish forecast for India's production could point towards further supply tightening, enhancing the bullish case for sugar prices. Conversely, the expected rise in Thailand's sugar production adds a layer of complexity, with a projected increase by +18% y/y.

Weather Impact: The adverse weather conditions mentioned—specifically drought and heat affecting Brazil—are crucial factors contributing to tighter sugar production. If these weather issues persist, they could significantly impact future production forecasts.

USDA Projections: The USDA's forecast of a +1.5% increase in global sugar production is somewhat contradictory given the production cuts discussed. However, the anticipated increase in sugar consumption to a record level might help mitigate some of the bearish effects of rising production numbers.

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