May 26 / Lívea Coda

The Northern Hemisphere adds to price resistance

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"Sugar fundamentals have remained steady, with Brazil’s Center-South region showing signs of healthy output despite a slow start to the 25/26 season and lower early yields due to early-development conditions. Market sentiment remains muted, as sugar prices lack support from fresh news and are instead influenced by macroeconomic factors."

The Northern Hemisphere adds to price resistance

  • Sugar prices remain subdued due to a lack of fresh fundamentals, with recent movements driven more by macroeconomic factors than supply-demand shifts.

  • Despite a slow start to the 25/26 season, Brazil’s Center-South is still expected to be a healthy one, with currently lower yields attributed to adverse early-development conditions.

  • A favorable crop outlook in the Northern Hemisphere is shifting attention away from Brazil and may further delay any price recovery.

  • Indian production is expected to fall sharply in 24/25 due to reduced acreage and poor weather, but a recovery is likely in 25/26 if monsoon conditions remain supportive.

  • Thailand’s outlook is cautiously optimistic, while China continues to support domestic production and selectively imports only at attractive price levels.

Sugar fundamentals have remained relatively stable in recent weeks. Although the Brazilian Center-South region experienced a slow start to the 25/26 season, indicators such as the Vegetation Health Index suggest another year of healthy output. While current yield figures are reported to be below last year’s levels, it’s important to consider that the 24/25 crop first results included a significant volume of leftover cane from the exceptionally strong 23/24 harvest. Additionally, the cane currently being harvested is from fields that were most affected by adverse conditions in 2024, making lower-yields expected.

While the Market waits for further developments in the biggest exporter, sugar prices have failed to react in the lack of supporting news . Funds have maintained short and stable positions, and recent price movements have been largely influenced by macroeconomic factors. For example, the spike observed last Wednesday was driven by a dollar index correction, rather than any new sugar-specific developments.

Image 1: Raw Sugar Net Speculative Positioning (‘000 lots)

Source: CFTC, Hedgepoint

Looking ahead, attention is beginning to shift toward the development of the 25/26 Northern Hemisphere crop. If conditions remain favorable, this could further delay a price recovery and provide a buffer against any potential supply constraints from Brazil, particularly if a more pessimistic narrative gains traction.

Regarding India, the Indian Sugar Mills Association (ISMA) recently projected sugar production for the 24/25 season at 26.1–26.2 million tons, marking a sharp decline from the previous season. This drop is primarily attributed to reduced acreage and adverse weather conditions in key producing states like Maharashtra and Karnataka and has already been heavily discussed. On the demand side, contrary to the typical annual growth trend, domestic consumption is expected to contract this season. This shift has already begun to influence domestic sugar prices and has contributed to higher-than-expected closing stock estimates, given the supply poor results.

Image 2: Sugar Balance - India (Mt Oct-Sep)

Source: ISMA, AISTA, ChiniMandi, NFCSF, Hedgepoint

Looking ahead to the 25/26 crop, the southwest monsoon is progressing well, albeit slightly ahead of its usual schedule. The Indian Meteorological Department forecasts a healthy amount of rainfall (at least 105% above-normal), which, combined with a recovery in planted area, could support a rebound in sugar production. Market consensus currently points to around 32 million tons of sugar production for 25/26. However, the lower ending stocks from 24/25 may limit the volume the government is willing to allocate for exports.

Image 3: Advance of the South-West Monsoon in India

Source: India Meteorological Department


In Thailand, rainfall has been generally favorable across cane-growing regions. However, the critical window for cane development lies ahead during the Northern Hemisphere summer, and conditions will need to be closely monitored in the coming months.

Turning to China, the Sugar Association has maintained its upper-range estimate for the 24/25 season at 11.15 million tons. Despite reports of drought in Guangxi earlier this year, favorable rainfall in May supported healthy cane development. Additionally, a 3.2% increase in planted area is projected for 25/26. This expansion is driven, according to the agency, by cane’s competitive advantage, elevated domestic prices, and strong backing from national policies. As a result, the Association expects the 25/26 crop to slightly exceed the current season’s excellent output, reaching 11.2 million tons. However, lingering concerns over the Guangxi drought are cited as a limiting factor that may prevent production from surpassing this level.

Image 4: Sugar Balance - China (Mt Oct-Sep)

Source: GSMN, CSA, YNTW, Refinitiv, Greenpool, Hedgepoint. Obs: stocks also account for bonded warehouses volume.

This suggests that China has valid reasons for holding back on imports, even when the import arbitrage appears favorable. It is rumored that the country was a key destination for the recent lower-priced May delivery, indicating that while China is still importing, it is likely to act only when prices are particularly attractive and avoid paying unnecessary premiums – building sugar stocks don’t seem to be a great necessity, especially given its economic context.

Ultimately, the optimistic outlook for the Northern Hemisphere is also weighing on sugar price recovery, keeping the market subdued as participants await further developments.

In Summary

Sugar fundamentals have remained steady, with Brazil’s Center-South region showing signs of healthy output despite a slow start to the 25/26 season and lower early yields due to early-development conditions. Market sentiment remains muted, as sugar prices lack support from fresh news and are instead influenced by macroeconomic factors. Meanwhile, attention is shifting to the Northern Hemisphere, where favorable crop prospects could further delay price recovery. In India, production is expected to drop sharply in 24/25 due to reduced acreage and poor weather, though a rebound is anticipated for 25/26 if monsoon conditions hold. Thailand’s outlook is cautiously optimistic, while China maintains strong domestic support and production growth, though it remains selective with imports, favoring lower-priced opportunities.

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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