May 20 / Lívea Coda

A sluggish start, but a bearish sentiment

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"Last week, the sugar market experienced a mix of stability and volatility. While macroeconomic optimism from U.S.–China tariff reductions initially penalized the sweetener, sugar prices were supported early in the week. UNICA’s April data revealed weaker crushing due to weather-related disruptions, briefly lifting prices. However, bearish sentiment returned during Sugar Week, reinforced by Thailand’s B-quota tender and expectations of a surplus year. As the new week begins, attention turns to the upcoming UNICA report for May, which could offer clearer signals on the crop’s trajectory."

A sluggish start, but a bearish sentiment

  • Sugar prices dipped on Monday following a stronger dollar and broader commodity corrections after U.S.–China tariff easing.

  • Center-South’s data showed disrupted cane crushing and poorer yields, pushing raw sugar prices up nearly 3% on Tuesday (13).

  • Despite short-term supply concerns, market consensus leans toward a surplus year in 25/26, pushed by a healthy participation from Center-South, weighing on prices.

  • Completion of the 2024/25 Thailand’s B-quota tender could be ambiguous. While its success points to existing demand, Thai producers might have ceased to expect better selling prices.

  • The next UNICA report for May’s first half is critical, with early signs pointing to little rain disruptions and a potential better result compared to April’s second fortnight.

Last week, the market experienced a period of relative stability, largely influenced by trader’s widespread participation in events held in New York. On the macroeconomic front, optimism returned as U.S.-China negotiations over the weekend led to a 90-day tariff reduction agreement. The U.S. committed to lowering tariffs on Chinese imports from 145% to 30%, while China reciprocated by cutting its levies from 125% to 10%. This diplomatic breakthrough strengthened the dollar index, triggering a wave of corrections across commodity markets — and sugar was no exception, giving back some of its previous gains yet on Monday (12).

Image 1: Dollar Index vs Sugar (c/lb)

Source: Refiniv, Hedgepoint


The release of UNICA’s latest figures for the second half of April quickly shifted market sentiment. As anticipated, the data confirmed operational challenges: persistent rainfall disrupted cane crushing, and the cane currently being harvested is the same that endured the harshest development conditions earlier in 2024 — leading to notably weaker yields. These factors triggered a nearly 3% spike in raw sugar prices, underscoring the market’s sensitivity to supply-side pressures.

Still, the bullish momentum was tempered during Sugar Week, where sentiment leaned bearish. While the impact of dry weather cannot be dismissed, the Vegetation Health Index continues to indicate a healthier crop compared to previous seasons in Brazilian CS. Moreover, market consensus is increasingly aligned around another year of abundant sugar output from Brazil: a narrative that continues to weigh on prices. Although cane volume was not a consensus, the increase in sugar mix expectations from most players supports this view.

Image 2: Estimated Lost Days of Crushing per Fortnight (No. of Days)

Source: Bloomberg, Hedgepoint

On Wednesday, sugar prices retreated, giving back part of their recent gains. This movement wasn’t driven solely by the broader bearish sentiment, which continues to point toward a surplus year in 25/26, but was also influenced by Thailand’s return to the market with the completion of its 2024/25 B-quota tender.

Image 3: Weekly Vegetation Health Index in CS Cane Areas

Source: NOAA, Hedgepoint


While some may view the tender’s success and rising export nominations from Brazil’s Center-South as supportive signals, there’s another interpretation: Thailand may have opted to sell now rather than wait for stronger price support. In this context, the market response remains ambiguous: a blend of cautious optimism and underlying pressure. As a result, the week's events didn’t trigger any major response in the speculative side either: funds remained attached to their previous position despite the sluggish start to Center-South’s 25/26 season.

As the week kicks off, all eyes are on how sugar prices will respond as market sentiment begins to consolidate after NY Sugar Week. The upcoming UNICA report for the first half of May will be a key indicator to watch. Early estimates suggest fewer lost days due to rainfall, hinting at a potentially stronger performance.

Image 4: Expected Cane Crushing Curve (Mt)

Source: UNICA, Hedgepoint

Most analysts, ourselves included, believe the crop remains on track and should gain pace. However, it’s important to note that this initial tranche reflects cane that endured the harshest weather conditions during its development in 2024. While the numbers may highlight some of those challenges, they shouldn’t be seen as the final word on the season’s outlook.

In Summary

Last week, the sugar market experienced a mix of stability and volatility. While macroeconomic optimism from U.S.–China tariff reductions initially penalized the sweetener, sugar prices were supported early in the week. UNICA’s April data revealed weaker crushing due to weather-related disruptions, briefly lifting prices. However, bearish sentiment returned during Sugar Week, reinforced by Thailand’s B-quota tender and expectations of a surplus year. As the new week begins, attention turns to the upcoming UNICA report for May, which could offer clearer signals on the crop’s trajectory.

Weekly Report — Sugar

Written by Lívea Coda
livea.coda@hedgepointglobal.com
Reviewed by Laleska Moda
laleska.moda@hedgepointglobal.com
www.hedgepointglobal.com

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