Thailand is experiencing record heat, which is affecting the country’s ability to harvest sugar cane amid the severe drought. The country accounts for 5% of global production, so the impact could put a tangible dent in the supply and thereby push prices higher.
“Reduced Thai sugar production is bullish for sugar prices,” Barchart confirmed. “Rainfall in Thailand has been below the same period last year. And the current El Nino weather system could continue to depress rainfall in Thailand. Sugar millers in Thailand are reporting the lowest yield from crushed cane this year in at least 13 years.”
Thailand’s battle with record-breaking heat is causing the country to seek rain production via artificial means. This includes deploying aircraft with cloud-seeding capabilities to induce rainfall, as reported by Bloomberg earlier this year.
While this has been affecting the country’s exports, Thailand’s economy has been helped by increased tourism this year as more travelers are venturing out this summer in a post-pandemic recovery. However, the country’s ability to produce sugar cane remains vital to its economy.
“Our sugar cane harvests fell by 11.7 million tonnes, down from 93.9 million tonnes in the 2022-23 crop year,” said Verasak Kwanmuang, a farmers’ representative who sits on the Office of the Cane and Sugar Board (OCSB), via a Bangkok Post article back in April.
Sugar price have retreated since reaching an apex in late 2023. Consumers were hit particularly hard during the holidays. That’s when demand is typically increased with the purchase of candy and other sugary treats. Within a three-year time frame, the Bloomberg Sugar Subindex is up just over 16%, while the S&P GSCI Sugar index is eking out a 0.38% gain.
India's Consumption Will Elevate Sugar Demand
The drought in Thailand adds pressure to meet demand from other countries such as India. That latter country is set for record consumption. According to the Business Standard, India will continue an ongoing uptrend in consumption within the next year.
“The country’s net sugar consumption might touch an unprecedented 30 million tonnes in the next 2024-25 season (October to September) on the back of a steady 2.2 per cent year-on-year growth rate, market participants said,” noted Business Standard.
The dip in sugar prices offers investors a chance to get sugar exposure at an area of value. Funds like the Teucrium Sugar ETF (CANE ) can offer portfolio diversification with exposure to agricultural commodities like sugar, primarily via futures contracts.
For more news, information, and analysis, visit the Commodities Channel.
