SEATTLE — The global sugar situation has completely changed from a year ago and even in the last eight months as the nearby No. 11 New York raw sugar futures contract has tumbled about 10% since Nov. 23, Jeff Dobrydney, senior vice president, head of futures & options at JSG Commodities, said Aug. 5 at the International Sweetener Symposium.    

Higher global sugar supplies and weakness in Brazil’s economy were the major reasons prices dropped sharply in the past several months, Dobrydney said. Better-than-expected sugar production in India and Thailand due to September rains contributed to higher global supplies, moving the world from a small sugar deficit to a small surplus in the current year. The value of Brazil’s currency against the US dollar was down 16% from a year ago, which has contributed to increased exports of Brazilian sugar after record-high 2023-24 production. A weak Brazilian real tends to encourage exports of sugar that are traded in dollars as it generates more reals.

Jeff Dobrydney, senior vice president, head of futures & options at JSG Commodities. 
Source: Sosland Publishing Co. 

“The world has enough sugar right now, while a year ago it was looking for supply,” Dobrydney said.

Further, the swing in supply and lower prices resulted in funds switching from a net long (bullish) position in New York No. 11 futures to a net short (bullish), which has contributed to increased volatility in futures prices.

“Investors in the market don’t like sugar now,” he said.

Brazil is the key in the world sugar market and must continue performing (producing) at a high level to maintain global sugar supplies, Dobrydney said. A 15% to 20% decline in Brazil’s sugar production would result in a “cocoa situation,” in which prices have been more than double year-ago levels because of sharply lower cocoa bean output in West Africa.

“The world is completely reliant on (Brazil) producing a massive amount of sugar every year,” he said. “Brazil has to perform at a high level.”

Dryness early in the season resulted in a strong start to the 2024-25 Brazilian crop year (April-March). The longer-term impact on full-year production remains to be seen and is expected to pull production down from a year ago, “but we haven’t seen it yet,” he noted.

Although early-season production was up sharply from early 2023-24, “we don’t expect a repeat” of Brazil’s record-high production of last year due to the dry weather, he said. Further contributing to strong sugar exports from Brazil is the fact that sugar prices remain above levels at which sugar would be diverted to ethanol.

India, where a crisis was averted in 2023-24 because of late calendar 2023 rainfall, has yet to announce whether it will export sugar in 2024-25. Residual sugar will first go to India’s growing ethanol industry, Dobrydney said, adding that if India does decide to export sugar, it will add pressure to global raw sugar prices.

Record high levels of US high-tier (duty) sugar imports in 2023-24 (and in recent years) will allow world raw sugar prices to impact refined sugar prices “into the foreseeable future,” Dobrydney said.