Sugar prices are trading at 11-year highs despite a buoyant early outlook for 2023/24 production in Brazil, where the sugarcane harvest began in early April.
Pushing prices higher are India’s disappointing sugar production from the recent harvest, and lower production in the European Union following last summer’s drought and heat wave, as Gro wrote about here. Global sugar stocks have declined two years in a row to the lowest level in a decade.
Only an outstanding crop in Brazil, the world’s largest producer, could turn around that trend of declining sugar stocks. Because of that, several key production variables are important to monitor in Gro as the Brazilian harvest proceeds over the next several months.
Brazil’s sugarcane crop benefited from plentiful rains in the months leading up to harvest, as shown in this display from Gro’s Climate Risk Navigator for Agriculture, weighted for sugarcane area in the main growing states. Forecasts call for only light precipitation over the broad area for the next couple of weeks. But any resumption of heavy rain could slow the pace of harvest and degrade crop quality.
How much of the sugarcane is processed into sugar versus ethanol also impacts production. So far this year, mills have been turning cane into sugar at a higher-than-average rate, a trend that could continue if global sugar prices remain elevated. However, factors that could drive increased ethanol production include notable increases in world crude oil prices and a strengthening of the Brazilian currency, the real, against the dollar.
In its initial estimate for the season, Brazil’s CONAB projects sugar production will increase by nearly 5% this year to the country’s second-highest-ever level.
India, the No. 2 sugar producer, had a disappointing harvest, forcing some mills to cease operating early in the big producing state of Maharashtra. The sugar shortfall, coupled with low domestic sugar stocks, could further boost India’s food price inflation during the high-demand summer season. It also could prompt the government to extend quotas currently in place on sugar exports — enacted to help control domestic inflation — which would further support world sugar prices.