Global sugar stocks may hit 6-year low by early 2025 due to Brazil drought

Drought and plant disease have delayed Brazil's sugar harvest, tightening supplies and keeping prices high, despite China's larger crop and easing global demand

Global sugar stocks are projected to hit a six-year low by early 2025 due to drought conditions affecting Brazil, the world’s leading sugar exporter, according to commodities trading firm Czarnikow Group Ltd.

The prolonged dry weather has weakened the sugar-cane crop, reducing sugar production in the final months of the current season and potentially delaying the start of next year’s harvest, noted Pedro Mizutani, Czarnikow’s head of raw sugar trading.

Ongoing concerns over production issues in Brazil, increased by the spread of plant disease, have kept sugar prices elevated above historical averages for several years, highlighting the global reliance on Brazilian supplies. The country is anticipated to account for nearly 75 per cent of the world’s raw sugar trade this year, as per data from consultancy Datagro.

Harvesting in Brazil’s key sugar-producing regions is expected to begin in the second half of April, a few weeks later than usual, according to Mizutani. The premium for March sugar deliveries compared to May supplies has risen since September, reflecting a supply squeeze.

While Brazilian production is set to decline, the impact may be mitigated by reduced demand and a larger crop in China, said Luiz Silvestre Coelho, chief trader at Sucres et Denrees SA in Brazil. Supply is still expected to be ‘very tight’ in the first quarter of 2025.

India extends sugar export ban

Last month, India extended its ban on sugar exports for a second consecutive year, as the nation, the largest consumer of sugar globally, faces the possibility of lower sugarcane output.

Additionally, the government intends to raise the price at which oil companies purchase ethanol from sugar mills to increase biofuel supplies.

India’s continued absence from the global sugar market could tighten global supplies further, potentially pushing up benchmark prices in markets like New York and London.

New Delhi is looking to prevent mills from exporting sugar at a time when Brazil is expected to see a production decline due to drought conditions. Several Indian sugar mills, including EID Parry, Balrampur Chini Mills, Shree Renuka, Bajaj Hindusthan, and Dwarikesh Sugar, have expanded their ethanol production capacities in recent years.

The government is also considering a more than 5 per cent increase in the ethanol procurement price for the upcoming marketing season starting in November.

(With agency inputs)