Persistent drought is expected to lead to sharply lower production as Brazil’s new sugarcane harvest gets underway. The Gro Drought Index for the sugar growing areas of São Paulo, Brazil’s most important sugarcane producing region, is at its highest levels in over a decade.
Global sugar stocks are at a 4-year low and sugar futures prices have risen to multi-year highs. The second-largest sugar exporter, Thailand, recently wrapped up its harvest, which dropped for the second year in a row. Thai production was down 5% year on year and puts pressure on Brazil, the world’s largest sugar producer, to make up for supply shortages.
Brazil’s sugarcane harvest began last month, and so far sugar production is down sharply from last year. The drought has reduced cane crushing rates by 25% from last year, decreasing the supply of sugarcane in this year's harvest. Cane sugar and ethanol production are down 28.8% and 22%, respectively, vs April 2020.
High crude oil prices and a recent shortage of ethanol could also encourage crushers to increase ethanol production at the expense of sugar until the supply normalizes. In April, 43% of the region’s cane was used to produce sugar, in line with last year’s level, but with the rising hydrous ethanol prices in Brazi’s benchmark Center-South region the balance could change.
Gro’s total recoverable sucrose (TRS) model for Sao Paulo projects biweekly total recoverable sucrose (TRS) ahead of UNICA’s release, enabling users to track the concentration of sucrose in Sao Paulo’s cane crop as the season advances. Reach out to firstname.lastname@example.org for more info on the model.
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