March NY world sugar #11 (SBH21) on Friday closed down -0.17 (-1.03%), and March London white sugar #5 (SWH21) closed down -0.40 (-0.09%).

Sugar prices on Friday closed moderately lower, with London sugar falling to a 1-week low. Sugar prices declined after Citigroup on Friday said that it sees sugar prices falling from current levels to 14-15 cents per pound on the outlook for a global sugar surplus. Citigroup is forecasting a global 2021/22 sugar surplus of +5.0 MMT compared with a -2.0 MMT deficit in 2020/21.

Sugar prices were already on the defensive from Thursday's news of higher sugar production from India, the world's second-biggest sugar exporter. The India Sugar Trade Association Thursday forecast that 2020/21 India sugar production will increase +9% y/y to 29.9 MMT. Last Tuesday, the Indian Sugar Mills Association (ISMA) reported that India Oct-Jan sugar production was already up +25% y/y to 17.68 MMT.

Ample sugar supply from Brazil is a negative factor for sugar. Unica reported Wednesday that Brazil's Center-South sugar production through January was up +44% y/y to 38.195 MMT. The percentage of cane used for sugar rose to 46.21% in 2020/21 from 34.48% in 2019/20.

Smaller sugar supplies from Thailand, the world's second-largest sugar exporter, are positive for sugar prices after the Thailand Office of the Cane & Sugar Board reported last Friday that Thailand's 2020/21 sugar production during Dec 10-Feb 4 fell -25% y/y to 4.7 MMT.

Sugar prices have underlying support from solid sugar demand from Asia. Sugar demand in Indonesia, the world's top importer, is a bullish factor for sugar prices after Indonesia's Trade Ministry on December 30 said it would allow sugar refiners to import 1.93 MMT of raw sugar in the first half of 2021. Also, Indonesia's Sugar Refivers Association recently said that it expects Indonesia's sugar imports to climb +10% y/y to a record 3.3 MMT in 2021 due to higher demand from the food and beverage industry. In addition, robust sugar demand in China, the world's second-largest sugar importer, is positive for prices after China's General Administrations of Customs reported last Monday that China's 2020 total sugar imports rose +55.5% y/y to 5.27 MMT.

Sugar prices have underlying support from dry conditions in Brazil that may curb sugarcane yields and reduce Brazil's sugar production. Maxar on Jan 27 said that "below-average precipitation is expected in the long term" in the Center South. Irregular rain in Brazil's sugar-growing areas is keeping soil moisture levels below normal. The U.S. Climate Prediction Center said on Jan 14 that a La Nina weather pattern would likely last at least until March and possibly beyond, which could lead to prolonged excessive dryness in Brazil that cuts sugarcane yields.

A bearish factor for sugar is the outlook for a global sugar surplus next year. Tropical Research Services (TRS) projects a global 2021/22 sugar surplus of 5.2 MMT on the prospects for sugar production to recover in Thailand and India. TRS predicts that Thailand's 2021/22 sugar production may rebound to 10 MMT from 6.9 MMT in 2020/21 and that India's 2021/22 sugar production my climb to a record 35.6 MMT from 31 MMT in 2020/21.

A negative factor for sugar is Tuesday's projection from Czarnikow Group that Thailand 2021/22 sugar production will surge +59% y/y to a 3-year high of 11 MMT, rebounding sharply from the 10-year low of 6.9 MMT in 2020/21.

The outlook for more sugar supplies from India is bearish for sugar prices. The Indian government, on December 16, authorized spending 35 billion rupees ($475 million) to help subsidize Indian sugar producers to export as much as 6 MMT in the 2020/21 season.

Big Picture Sugar Market Factors: World sugar production in 2020/21 (Apr/Mar) is expected to climb +0.9% y/y to 171.1 MMT after falling -8.4% in 2019/20 to 169.6 MMT (ISO). The world sugar deficit in 2020/21 is expected to widen to a -3.5 MMT deficit from a +1.86 MMT surplus in 2019/20 (ISO). Sugar production by Brazil, the world's largest sugar producer, in 2020/21 (Apr/Mar) will climb by +32% y/y to 39.3 MMT from 29.8 MMT in 2019/20, as millers divert 46.4% of cane juice to produce sugar (up from 34.9% in 2019/20) due to the weak outlook for ethanol demand and prices (Conab). Sugar production by India, the world's second-largest sugar producer, in 2020/21 will climb +13% y/y to 31 MMT due to a good monsoon season (India's Sugar Mills Association).