COMMODITIES 2025: Asian sugar market to see shifts amid evolving biofuel landscape, supply challenges

This is part of the COMMODITIES 2025 series where our reporters bring to you key themes that will drive commodities markets in 2025.

The Asian sugar market is poised for significant shifts in 2025 driven by a combination of agricultural dynamics, environmental policy and global market conditions. The global biofuel movement, propelled by a collective drive to limit carbon emissions by 2030, will have a trickle-down impact on the sugar market, particularly in regions where sugarcane is the primary feedstock for biofuels.

Higher cane output from Thailand

In Thailand, the 2024-25 sugarcane crushing season commenced Dec. 6, starting from the Eastern and Northeastern regions. S&P Global Commodity Insights estimates the cane crush for marketing year 2024-25 (October-September) at 102 million mt, a 24% increase year over year.

"We should be seeing strong Thai exports in Q1 2025, especially during a period of seasonal tightness in the global market without Brazilian crop," said a Singapore-based trader.

As of Dec. 15, the total cane crushed in Thailand for the 2024-25 season was at 4.47 million mt, up 2.07 million mt compared with the same time last year. The main reason for this increase is higher cane availability, along with mills starting six days earlier this year than the last.

Recent weather forecasts indicate that wet conditions may slow the crushing pace in December, potentially impacting sugar recovery rates. Nonetheless, the market expects this precipitation to prove beneficial for the 2025-26 cane planting, enhancing soil moisture and aiding germination for crops planted from February to March.

The initial sugarcane price for the 2024-25 season has been set at Baht 1,160/mt, reflecting a 17% decrease from the 2023-24 season cane price of Baht 1,404/mt. Despite the lower price, many farmers may shift their focus from cassava to sugarcane as cassava prices have fallen over 30% year over year. This shift could lead to an increase in sugarcane acreage, with Commodity Insights revising its Thai crop estimates for 2025-26 to 11.7 million mt, up from earlier projections of 10.6 million mt.

A Thailand-based source said, "Cassava export prices are currently in the low $200s/mt FOB Thailand but demand from China has been slow this year."

Given this backdrop of lower feedstock costs, Thailand ethanol prices are expected to decline in 2025. The market expectation for 2025 is at around Baht 23-24/liter. The Energy Policy and Planning Office reference price for ethanol in December was Baht 27.70/liter, reflecting a slight decrease from November figures of Baht 27.82/liter.

Based on data from the Department of Alternative Energy Development and Efficiency, October's ethanol consumption rose to 3.42 million liters/day, with a blending ratio of 10.92% against gasoline. Despite recovering fuel consumption in the North, overall gasoline use remains lower than 2023 levels.

"The rise of electric vehicles coupled with the launch of new public transportation lines contributed to the reduced demand for petrol," said a Thailand-based official.

India crop export uncertainty

According to data from the Indian Sugar and Bio-energy Manufacturers Association, ISMA, total MY 2024-25 sugar production in India as of Dec. 15 stood at 6.14 million mt, compared with 7.4 million mt during the same time the previous year. Total production among the top three producing states -- Uttar Pradesh, Maharashtra, and Karnataka -- stood at 5.36 million mt, down approximately 1 million mt compared with the previous year. These states together contribute 80%-85% of total Indian production.

Commodity Insights estimates India's production in 2024- 25 (post-diversion) at 29.6 million mt, which is 7% lower than in 2023-24, with 4 million mt of sugar being diverted for ethanol.

In India, domestic sugar prices were heardat around Rupees 34,000/mt Dec. 13 and have been falling over the past few months due to ongoing crushing operations.

"Prices have been on a downtrend lately and mills are struggling with the lower prices. However, the government has not made any announcement regarding sugar exports for the new crop season and it is concerning," said an India-based source.

Another trader had a different view, and said domestic prices would rise after the crushing season ends, especially with the lower production estimates for the new crop.

Uncertainty around the export quota persists as the government aims to have sufficient supply to meet its 20% ethanol blending mandate by 2025.

The final ethanol blend volume for the period from November 2023 to October 2024 has yet to be announced. However, it has been stated that the blend rate is expected to reach 14%, just 1 percentage point shy of the E15 target. India had achieved a blend rate of 16.9% in October. For the crop year 2024-2025, India aims to meet the E20 blending target.

Dry bulk freight steady

Dry bulk sugar freight rates have remained relatively stable throughout 2024 despite ongoing geopolitical tensions, including the Ukraine conflict and disruptions in the Red Sea.

The freight differential between Brazil and Thailand to Indonesia is currently around $14/mt, according to Commodity Insights data, with the Thailand-Indonesia freight rate expected to remain largely rangebound going into Q1. This is a good sign especially as Indonesia has released its import licenses for sugar.

According to market sources, the import volume for Indonesia would be at around 4.2 million mt for industrial use and re-export purposes in 2025. However, there will not be any for refined sugar. On Dec. 10, the Chief Food Affairs Minister Zulkifli Hasan imposed a ban on sugar importsfor consumption purposes.

Platts assessed Thai HiPol raw sugar CFR Indonesia at $515.50/mt Dec. 19.

While sugar freight rates have remained relatively steady in 2024, stakeholders will continue to monitor dry bulk freight rates closely amid the ongoing changes in the shipping industry. This vigilance is essential to navigate the complexities and uncertainties that may impact supply chains and overall market dynamics.