Nearby raw world sugar futures continued to decline w-o-w, as the July contract closed down 2%. Market participants state that weaker demand has caused some concerns about large deliveries of contracted sugar in the weeks ahead, as futures prices retreat to near four-year lows.
Sugar prices have decreased in the past three months as the USDA projects a global sugar surplus, Expana reported (customer access only). The outlook is higher for sugar production in India, which has had a bearish effect on prices. The country is the world’s second-largest sugar producer. India’s sugar production is expected to rise 19% y-o-y, totaling 35 million metric tons.
However, sugar prices have some support from reduced production in Brazil. Sugar production in Brazil’s center-south region decreased 22% in the first half of June compared to a year prior, according to UNICA . This was a slightly steeper decline than expected, as UNICA reported that sugar production totaled 2.45 million metric tons, down from 3.15 million metric tons a year ago. The year prior was a record high though, as Brazil’s sugar cane fields performed exceptionally well due to favorable weather conditions, investment in field renovation, and yield improvement.
Sugar demand concerns were reflected in the USDA’s June Sweetener Market Data report, which showed deliveries for human consumption down 6% y-o-y. Also, deliveries for October through April were down 3% from a year ago. When including lower exports in the US and miscellaneous use, total sugar use was down nearly 9% y-o-y. Deliveries for categories like dairy, confectionery, wholesale, and retail have declined from the previous year, supporting a bearish market sentiment as industry players cite limited trading activity compared to last summer.
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Image source: Getty
Written by Andraia Torsiello
