International Sugar Prices on a Steady Rise – Is There More Upside?

On May 23rd, it is expected that the large-scale export of Brazilian sugar to the international market will begin in the third quarter, and before that, the tight trade pattern in the international sugar market is difficult to ease in the short term. Raw sugar futures prices in the second quarter may remain high, with the expected ICE raw sugar front-month contract price fluctuating between 24-27 cents/pound.

1. The fundamentals of the international sugar market are good, but there are still risks at the macro level. As of May 9th, the ICE raw sugar futures + options speculative net long positions were at a historically high level of 218,290 contracts. However, as the US debt crisis continues to ferment and concerns about global economic recession grow, the commodity market investment sentiment tends to be cautious, and the WTI crude oil market operates weakly around $70/barrel.
2. The expectation of increased sugar production in Brazil has been fully digested on the trading floor, and the next focus will be on whether its production progress and total output are consistent with expectations. Raw sugar prices continue to rise, and sugar mills tend to maximize sugar production rather than ethanol. It is expected that the sugar production ratio of Brazilian sugar mills will reach 47%-48% in the 2023/2024 crushing season.
3. The El Niño phenomenon will lead to increased rainfall in Brazil, which will also affect the production progress of sugar mills and the efficiency of port loading. The heavy rain in central and southern Brazil in April affected sugarcane harvesting, resulting in a 12.54% YoY decrease in sugarcane crushing in the latter half of the month. Fortunately, the rainfall in the first half of May is expected to decrease, which is conducive to the crushing of sugarcane and sugar production in the first half of the month.