Sugar at 4-Year High Due to Threat of Brazil Strike and Tight Supply

14 January 2021

Sugar supplies from Brazil, the world’s leading producer, could come to an abrupt halt on Feb. 1 if a threatened trucker strike takes place. 

 

The news pushed sugar futures prices on the Intercontinental Exchange (ICE) to a 4-year high of 16.73 cents/pound, a 5.6% move. The market was already tight due to a global supply deficit caused by droughts in Thailand and the EU (as shown in the Gro Drought Index), despite record production from Brazil. Potential disruption of Brazil’s crucial exports put traders on edge.

 

Brazil’s truckers unions are threatening to strike in protest of rising diesel prices. The president of one organization, the National Association of Autonomous Transport, said to the media that the strike could be bigger than in 2018, which crippled logistics across the country. 

 

Gro shows that sugar has been pouring out of Brazil at a record pace in recent months and South-Central Brazil is finishing an all-time record harvest. A strike would prevent Brazilian sugar from reaching global markets and keep prices high.

 

The March contract price is at a premium of 0.98 cents/pound over the May contract, reflecting the market’s view that supplies will be extremely tight for the March delivery period. 

 

A long strike could also impact Brazilian soybean exports. Gro’s Brazilian soybean yield forecast model currently forecasts lower production than USDA and CONAB estimates, and further constraints on exportable supplies will send buyers to the United States. 

 

The 2018 truckers strike officially lasted only 5 days, but caused severe disruptions and economic damage across the country. Commodities are predominantly transported by truck to the main export terminals and the strike caused a notable reduction in flow. Commodity traders will be keeping close watch on the stalemate between the truckers and the government. 

 

A sharp rally in the Brazilian real over the past few days is also contributing to the gain in sugar prices. 

 

This insight was powered by the Gro platform, which enables better and faster decisions about factors affecting the entire global agricultural ecosystem. Gro organizes over 40,000 datasets from sources around the world into a unified ontology, which allows users to derive valuable insights such as this one. You can explore the data available on Gro with a free account, or please get in touch if you would like to learn more about a specific crop, region, or business issue.

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