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Sugar on a tightrope: what are the risks? Understand market trends




Market conditions have shifted to a more balanced state, leading to falling prices and near-neutral speculative positions.

Both crude and white are in a delicate balance, with total global trade flows and supply and demand predicted to be in a small surplus. Any disturbance to its balance could affect prices and speculative positions. Currently, the market is leaning towards downward trends, considering factors such as Brazil's positive results and the potential for another strong harvest in 24/25.

Weather patterns, geopolitical conflicts and the macroeconomy are crucial factors to monitor in 2024. The market has shown signs of being well balanced rather than the extreme tightening previously predicted. As a direct result of the more comfortable situation, prices melted, while speculative positions were almost completely liquidated. A new comfortable range has been established between 20.5 and 22c/lb, and raw sugar hovers in the middle. White sugar, however, has a slightly different story.

“With a small deficit to be resolved after gross processing, the white premium may find support in the short/medium term. Additionally, the ongoing conflict in the Red Sea has contributed to recent gains. International trade with East Africa and East Asia is facing interruptions and cost increases”, explains Lívea Coda, Sugar and Ethanol analyst at the company.

And he continues: “One thing that the qualities have in common is that they are both walking a tightrope. They are basically in a balanced market, especially if they are added. Total global trade flow and the balance between supply and demand are expected to be in a small surplus, which means that any disturbance could trigger prices and speculative agents. A 1.5 million ton increase in demand from any country could offset current comfort, while higher-than-expected yields from any producer could lead to a backlog. In this context, two questions arise: where are we going today and what should we monitor?”

Looking at the fundamentals today, the market appears to be tilting to the bearish side.

“Of course, prices remain historically high, but with Brazil's great result so far and the possibility of another big harvest in 24/25, along with some recovery in productivity in Maharashtra and Karnataka, the market may be comfortable for a while ”, says the analyst.

It is clear that the announced improvement in productivity in some Indian states does not guarantee a harvest comparable to that of previous years, even with no exports. This only suggests that the situation may not be as extreme as initially portrayed.


The poor results in the Northern Hemisphere are already included in the small surplus, but monitoring their magnitude is still crucial. For example, sugar production in India between October and December reached 11.2 MT, 7.2% lower compared to the 22/23 season. In Thailand, the difference is greater, reaching a variation of -33% until December 23rd.

“However, the reductions remain within expectations and, therefore, we have not changed our forecast for the countries. India is expected to reach around 32 MT of sugar, without exports, while Thailand could reach 8.2 MT and a reduced share in global trade flows with just over 5 MT”, he states.

In addition to the geopolitical conflicts that affect the global supply chain and the progress of the Northern Hemisphere harvest, there are other factors that deserve special attention. The actions of central banks in their ongoing battle against inflation and unpredictable weather patterns are among these considerations.

“Regarding climate, we discussed the impacts of the recent drought in the Central South in our previous report and the implications it had and may still have on the availability of sugar in the region. In this report, we would like to highlight a still subtle risk: the return of La Niña. ENSO forecast models have started to indicate a possible direct change from El Niño to La Niña this year”, points out Lívea.


Of course, it is still too early to make a statement, but we must remember that the impact of these weather patterns on the sugar market depends on the period of their occurrence, duration and intensity – and can contribute to both a recovery and an even sharper correction in prices. As climate events can alter precipitation regimes, they often affect productivity.

According to the analyst, “if it is active between June and August, and is not so intense, La Niña could be positive for increasing the sucrose content in the Central South. Furthermore, it leads to greater precipitation in India and Central America, possibly boosting the development of 24/25 sugarcane. However, if it is extremely intense, it could increase problems with frost in the Central South and floods in the Northern Hemisphere”, he concludes.

In summary

The market is currently navigating a delicate balance, teetering on the edge. At the moment, it appears to be leaning towards downtrends but finding some support in the Ramadan period and disruptions on a crucial trade route.

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