Sugar prices in 2024 will likely be lower than last year with prices currently ruling at a three-week low but they will stay elevated than normal. Month-on-month prices are up 2 per cent but the commodity has come under pressure on prospects of a rise in production. 

The Trading Economics website said prices have declined now on expectations of robust supply from Brazil, world’s top exporter, offsetting worries of shortage in Asia, particularly India and Thailand. 

Currently, raw sugar March futures on the InterContinental Exchange, New York, are quoting at 22.86 cents a pound (₹42,175/tonne), while white sugar futures for delivery in March are ruling at $652.50 a tonne (₹54,175) in London. Brazilian State agency COAB has estimated sugarcane production in the Latin American nation at 678 million tonnes (mt), an increase of 11 per cent year-on-year (y-o-y).  

Price forecast

Cooling crude oil prices, too, have impacted sugar prices as higher crude oil prices will result in more sugarcane being diverted to ethanol production in Brazil, analysts said. Research agency BMI, a unit of Fitch Solutions, said, “We are maintaining our forecast for the average annual front-month ICE-listed sugar price in 2024 at 23.5 cents per pound, which is a slight decrease from the 24.1 cents average in 2023.”

Despite COAB estimates, Dutch multinational banking and financial services group Rabobank said there were still concerns over rains in the Brazilian sugar belt. “January rainfall ended up being 45 per cent below normal. This follows December rainfall at 48 per cent below normal and November at 23 per cent below normal,” it said.

The World Bank, in its Commodity Outlook, said sugar prices are expected to decline from 2023 highs on bumper sugar harvest from Brazil. 

El Nino impact

Sugar prices had come off highs in December 2023 on robust exports from Brazil and India’s ban on diverting sugarcane juice for ethanol production, BMI said.  “However, prices have since begun to climb, continuing the upward trend that dominated most of 2023. Drought conditions in South-East Asia have affected sugar production in major markets, notably in India, where sugar mill output has fallen by 7 per cent,” the research agency said. 

This decrease has reignited market concerns over the  possibility of India extending its export restrictions. “Sugar prices have increased by 14.5 per cent since the beginning of the year, largely due to this policy change,” it said.

The World Bank said unfavourable rain in major sugar exporters in the current El Niño season and concerns about export restrictions should lead to higher sugar prices in 2024. “Severe drought could cut sugar production in Thailand, the world’s second-largest exporter, by almost 20 per cent in 2024, while drought conditions in India could cut production by more than 3 per cent,” it said. 

Marginal surplus rise

However, record-high sugar production  for the 2023-24 season in Brazil, the world’s largest sugar exporter, will help temper prices, the outlook said. 

According to the US Department of Agriculture (USDA), global exports are estimated higher as Brazil and Thailand are expected to more than offset lower shipments from India and Pakistan.

In October, the USDA estimated global production higher by 8.2 million tonnes (mt) y-o-y to 183.5 mt. BMI has pegged the global output at 182 mt, marking a 2.2 per cent y-o-y growth.

The market is expected to be finely balanced, with BMI saying it expects the surplus to increase marginally from 0.6 mt to 0.8 mt. This will mean supplies will remain tight and a further downturn in production expectations across any of the major markets could see the global production balance swing into a deficit.

Incentivising Brazil mills

The research agency said this is due to substantial increases in output from China, which is projected to see a 9.7 per cent rise, and Brazil, where production is expected to grow by 9.1 per cent. “However, this growth is somewhat tempered by notable declines in other key regions, with Thailand’s production projected to drop by 16.7 per cent and India’s by a more modest 1.6 per cent,” it said.

The World Bank said higher sugar prices will incentivise Brazilian mills to favour sugar production over ethanol. BMI consented with the view saying “focusing on Brazil, the world’s leading sugar producer, we foresee a continuation of strong sugar output into 2024”.  

BMI has pegged consumption at 180.4 mt, up 0.8 per cent y-o-y. “The increase in global consumption is driven by an expected increase of 5.1 per cent in consumption in India. Meanwhile, across the other major consumers, consumption is expected to remain stable,” it said.