World sugar prices are experiencing a significant decline, hitting their lowest levels in several months. However, despite this drop, domestic sugar prices remain higher than they were at the same time last year. Let’s examine the factors driving this trend.
World Sugar Price Situation
According to the latest data from January 7, 2025, NY sugar prices have fallen to a 3.5-month low of 19.33 US cents per pound, down 1.63% compared to the previous week. Similarly, London sugar prices have reached a 2.5-year low.
Over the past three months, sugar prices have decreased by 16.61%, dropping from a peak of 23.24 US cents per pound in October 2024 to 19.12 US cents per pound by the end of December. This decline is primarily due to improvements in supply prospects, fueled by favorable weather conditions and increased production from major producing countries.
The current downward trend suggests that the market is gradually stabilizing.
However, domestic sugar prices remain 1,000 - 2,000 VND/kg higher than at the same time last year, partly due to domestic demand and transportation costs.
Domestic Sugar Prices Remain High
While world sugar prices are hitting their lowest levels in months due to abundant supply and weak demand, domestic sugar prices are still recording higher levels compared to the same period last year. The reasons for this include:
High Production Costs: Rising prices for fertilizers, energy, and labor have driven up the cost of sugar production.
Import Difficulties: Trade barriers and high logistics costs have impacted the ability to import raw sugar.
Limited Supply: Domestic sugar production has not been able to meet domestic consumption demand, particularly as businesses prioritize exports to capitalize on higher international prices.
Factors Affecting Sugar Prices
The improvement in sugar production prospects is a key factor behind the price decline. Major producing countries such as Brazil and Thailand have reported favorable weather conditions that are expected to boost production. This has alleviated concerns about a supply crisis similar to those in previous years.
Brazil’s sugar production for the 2023/24 crop year is projected to reach a record 45.68 million tons, according to the USDA and Phu Hung Securities.
Brazil’s sugar production for the 2023/24 crop year is projected to reach a record 45.68 million tons
Source: USDA, Phu Hung Securities
Although supply is increasing, demand has not kept pace, particularly in the Asian and European markets. A forecasted decline in consumption has reduced demand for sugar in processed products.
Furthermore, favorable weather has enabled many major sugar-producing regions to boost output, while conflicts in former producing countries like Russia and Ukraine have not caused the same level of instability as in the 2022-2023 period.
How to Balance Supply and Demand?
With global supply improving, the downward trend in world sugar prices is likely to continue in the short term. However, the domestic market still faces upward price pressures due to persistent production costs and import challenges.
Standard sugarcane production process
If domestic sugar output can be improved through the application of technology and optimized production processes, domestic sugar prices may gradually stabilize. Additionally, reducing trade barriers and enhancing the supply chain will be crucial factors in balancing supply and demand, bringing domestic sugar prices closer to international levels.
