Stalemate in the sugar market

20.07.2023 – Is this it for the sugar rally? Or will the price make another run for an upward breakout? We look at the bullish and bearish arguments.

In April, the sugar price reached its highest level since 2012. In recent weeks, however, the price set back again, which was mainly due to Brazil, see below. Can the price still rise above the interim record of April? Presumably, a global shock would be needed for that to happen, like the 1973 oil crisis: in November 1974, sugar marked an all-time high of 65.20 cents per pound. A possible effect of this magnitude would be persistent weather capriciousness.


Source: Bernstein Bank GmbH


But first, a look at current developments. We see a tug of war in the market between bulls and bears.

Bullish: Real, Ethanol, Thailand and India
“” initially cited the strength in the Brazilian real against the dollar as reasons for the recent price increase. This dampens exports from Brazil. In addition, the rise in oil prices has created more demand in sugar mills – in such periods, the detour of sugar to ethanol production increases.

In addition, the ongoing drought in Thailand is reducing supply, and the country is the world’s third-largest sugar producer. This year, he said, Thailand’s rainfall is about 28 percent below last year’s volume. Wholesaler Czarnikow had warned that Thai production this year could fall below the level of the 2009/10 season – and that was the second-lowest level ever.
Further, he said, the El Nino weather phenomenon could exacerbate the situation. This usually brings heavy rains to Brazil as well as drought to India and surrounding areas. India and Brazil are the world’s two largest sugar producers. Prices also rose sharply during the last major drought in Asia in 2015 and 2016. “” pointed out that India had cut volumes for export because of the drought.

Bearish: Brazil and sweetener substitutes

However, it had been rather dry in Brazil recently – and this has accelerated the harvest, according to Furthermore, the probability of frost has decreased. For example, Unica, which is Brazil’s sugarcane industry association, recently reported that output in the south and center of the country – which is Brazil’s most important growing region – was up 7.6 percent year over year in the second half of June. He said production so far in the 2023/2024 season has climbed as much as nearly 26 percent year over year. Czarnikow raised his forecast for the Center-South region’s crop this year by 500,000 tons to 38.2 million tons.
Plus, sugar is replaceable these days. The Wall Street Journal speculated back in April that beverage companies could increasingly switch to fructose syrup, which is derived from grains.
The conclusion to be drawn from all this is that the crucial question will be the harvest prospects among the top 3. So keep an eye on the real-time news. Whether long or short – Bernstein Bank wishes successful trades and investments!



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CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 68% of retail investor accounts lose money when trading CFDs with this provider.
You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.