CropGPT Sugar - Futures Increase, Dollar and Oil Impact Production - April 1st

CropGPT

Welcome to weekly summary of the global sugar market for April 1st 2024. For more information on any aspect of this report, please visit the CropGPT website for far more detailed reporting and analysis.

Sugar futures experienced a significant increase this Thursday on the New York and London exchanges. The most actively traded raw sugar contract on the New York Stock Exchange closed at 22.52 cents per pound, marking a 1.49 point increase for the day, reaching a high of 22.59 cents and a low of 22.06 cents. At the same time, in London, the principal sugar contract rose by 1.07 points, concluding the day at 652.50 dollars per tonne. Over the week, this main contract appreciated by 2.60 points, reflecting underlying market dynamics.

In macro economics, oil and the dollar are impacting sugar production:

The surge in crude oil prices globally has influenced the sugar market, as the oil prices impacts the ratio of sugar to ethanol production, potentially modifying the production mix in favor of ethanol, thereby affecting sugar's supply dynamics. The rising dollar against the Brazilian real concurrently plays a complicating role, potentially putting a cap on price escalations.

Market sentiments have been influenced by the anticipation of potential restrictions on Mexico's sugar imports into the U.S., compounded by logistical challenges posed by an unexpected port closure on the U.S. East Coast. A cargo vessel incident in Baltimore, Maryland, severely disrupted operations, exacerbating supply concerns and prompting a broader market response.

In contrast Brazil presents a more optimistic outlook on its 2024/25 sugar harvest. Initial reports for the first half of March from Unica, Brazil’s Sugarcane Industry Association, detail a promising start with 64,000 tons of sugar produced. Since April 1, 2023, sugar production has surged to 42.24 million tons, significantly outpacing the previous cycle's production of 33.58 million tons.

The start of the 2024/25 harvest saw 24 units starting operations within the initial 15 days of March, expanding to 40 units by the fortnight's end. This includes 28 sugarcane processing units, along with nine ethanol and three flexible mills, indicating a robust start compared to the previous year's 23 operational units.

The sugar market in São Paulo remains tight, with Cepea/Esalq indicating a minor appreciation in the ICUMSA 130 to 180 segment, suggesting sustained solid demand. On the export front, the VHP sugar FOB price at Santos presented a slight decline, illustrating the volatile nature of commodity pricing.

A comprehensive assessment of Brazil's south-central region reveals a substantial rise in sugarcane milling, reaching 2.22 million tons in the initial days of March 2024. The region's sugar production for the 2023-2024 cycle impressively stands at 42.24 million tons, with ethanol sales witnessing a staggering 51.38% increase over the previous year, reflecting dynamic shifts in commodity production and consumption patterns.

Finally - China, Ukraine, and US.

China’s economic resurgence may drive its sugar market, bolstered by a minimum cane price policy to stabilize exports.

Ukraine's agricultural sector shows promising signs with an increased sowing area for sugar beets, anticipating higher yield potentials. Egypt, too, reports growing cane sugar production, highlighting the industry's strategic importance despite a strong pivot towards sugar beet cultivation.

Lastly, the U.S. braces for a shortfall in Mexican sugar production, necessitating increased imports to bolster domestic supply, emphasizing the global interconnectivity of sugar markets and the myriad factors influencing price and supply dynamics.Remember, our CropGPT site contains far more details and reports about the sugar market, including crop health reports, 20 years of weather data, and even pricing data and earning call analysis. This podcast is just a few selected highlights for the week.