Sugar has been under pressure for several weeks, and the May contract reached an 8 1/2 week low on Tuesday. There have been reports that Brazilian firms are ramping up their production of ethanol from corn, which should reduce the ethanol output from cane crushing. Brazil’s Center-South mills will start up operations for the 2024/25 season over the next few weeks and should reach full speed by mid-April. Some forecasts call for sugar production to have a larger share of cane crushing than the 49% seen this season.
Source: USDA
On the other hand, many early forecasts are calling for Brazil’s 2024/25 Center-South sugar production to come in at 40.5-41 million tonnes, which would be down from 42.2 million for 2023/24. Cane yields were declining at the end of this season. Forecasts are calling for drier than normal weather over Brazil’s Center-South cane-growing regions during the next few months, and that could have a negative impact on the 2024/25 crop.
India is expected to extend its sugar export ban until next year, and Thailand’s 2024/25 sugar production may have a modest increase at best. If next season’s Brazilian sugar production declines from this season, the world’s three largest exporting nations (who normally account for two-thirds of global exports) will see a decline. This suggests sugar could be undervalued and be poised for a recovery over the next few weeks.
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Originally Published March 8, 2024
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