In an unexpected development, CovrigAnalytics reported on Monday that the global sugar production deficit for the ongoing 2023/24 crop year has grown to 2.4 million metric tons, surpassing earlier estimates by 200,000 tons. This surprising revelation coincides with China making a substantial cut of 440,000 tons in its sugar demand.
Contrary to initial expectations, the increased sugar production in Brazil, Russia, and China is not enough to offset significant losses experienced in India and Thailand. Unfavorable weather conditions, particularly inadequate humidity, have adversely impacted the crops in these regions.
Projected figures by CovrigAnalytics estimate global sugar production for the 2023/24 period at 187.5 million tons, down from 189.4 million tons in the previous year. On the other hand, annual sugar demand is anticipated to rise to 189.8 million tons, up from 188.16 million tons in 2022/23. This indicates an ongoing trend where nations continue depleting existing low sugar stocks.
Despite the evident supply-demand gap, the report suggests that NY11 (sugar futures) prices may maintain a stable trading range, fluctuating by 2-3 cents per lb from current levels. The current market scenario doesn’t indicate a substantial shift toward either a bullish or bearish market.
Importing nations are grappling with challenges in procuring sugar at current elevated prices. CovrigAnalytics notes that “Africa is facing difficulties in securing hard currencies, paying the same amount of dollars for reduced volumes, while China and South Korea might be exploring alternatives, such as shifting to other sweeteners like corn syrup.”
These challenges raise concerns about the stability of the global sugar market, with raw sugar futures reaching a 12-year price peak last week at the ICE exchange. Industry participants are closely monitoring how key players navigate these challenges and whether adjustments in consumption patterns, like the potential shift to alternative sweeteners, will become more widespread.
Photo from the Bureau of Customs.
By: Montel Kamau
Serrari Financial Analyst
14th November, 2023
