Commodity trader Czarnikow Group has issued a warning about the global sugar supply for the coming year due to poor sugarcane harvests in Brazil, the world's largest sugar exporter. Drought conditions in Brazil have hampered production, with global sugar supplies expected to shrink to their lowest level in six years by early 2025.
The severe drought has negatively impacted sugarcane growth, limiting the ability of sugar mills to produce sugar in the coming months. This suggests a delayed harvest next year. Historically, sugar prices have remained above average primarily due to instability in Brazilian supply. Brazil accounts for a significant portion of global raw sugar trade, with an estimated 75% share this year, according to consultancy Datagro.
Additional challenges such as unexpected wildfires and the spread of crop diseases have further affected Brazilian agriculture. Simultaneously, India, another major sugar exporter, has imposed export restrictions due to its lower-than-usual sugar production in recent years.
Large trading company Sucres et Denrées previously estimated a global sugar market deficit of nearly 2 million metric tons this year, largely due to poor output from Brazil. The country's central-southern region, a key sugar export hub, saw a nearly 40% drop in raw sugar production compared to the same period last year.
The International Sugar Organization predicted a global sugar shortfall of 3.58 million tons for the 2024/25 cycle, a significant increase from 200,000 tons the previous year. Despite a slowdown in demand and increased production in China, the first quarter of next year is expected to see very tight global supply, according to Luiz Silvestre Coelho, chief trader at Sucres et Denrées.
Pedro Mizutani, Czarnikow's head of raw sugar trading, noted that the sugarcane harvest in Brazil's main production areas would begin a few weeks later than usual in April. Since September, traders have been paying higher premiums for sugar deliveries in March, highlighting supply concerns.
Recently, March New York world sugar futures prices fell slightly by 1.58%, mainly due to recent rainfall in Brazil that could alleviate drought conditions in sugarcane regions. Additionally, a weaker Brazilian real has helped moderate sugar prices. However, sugar futures prices remain at elevated levels.
