Sugar Futures Fall on Brazil’s Upbeat Sugarcane Outlook

Sugar prices have retreated sharply from multi-year highs amid a brightening outlook for Brazil’s upcoming sugarcane crop, the world’s largest. 

In addition, India’s announcement that it intends to use more of its sugarcane crop to produce sugar — and less of it to produce ethanol — has also helped to push global sugar prices lower. 

Lifting Brazil’s sugar prospects is record-high accumulated precipitation in the top three sugarcane-growing states of São Paulo, Minas Gerais, and Goiás, as shown by Gro’s Climate Risk Navigator for Agriculture, which can be weighted for specific crops. In São Paulo, rainfall totals for October and November were nearly double those of a year earlier, as seen in this Gro display.

Precipitation trends could continue to favor a healthy Brazil crop. While Gro’s forecast data indicates below-normal rainfall through the end of December, the forecasts call for above-average precipitation in January and normal rainfall levels thereafter, although weather predictions that far into the future can be highly uncertain. Brazil’s rainy season runs from October through March and adequate precipitation is needed during sugarcane’s vegetative phase to stimulate rapid growth, stalk elongation, and internode formation. 

Brazilian government agency CONAB recently raised its estimate for sugarcane production for the current crop year, which ends in March 2024, to 677.6 million tonnes. That’s up nearly 11% from last year’s total and is nearly 4% ahead of CONAB’s previous estimate released in August.

The improved prospects for Brazil’s sugarcane production come at a critical time when global sugar stocks are at the lowest level seen in the past decade. In addition, El Nino has increased risks to sugarcane production in India and Thailand, the No. 2 and No. 3 producers, as Gro highlighted here. 

ICE sugar futures prices hovered at 12-year highs from mid-September to late November. While futures prices have retreated from that peak — they are currently down over 18% since November 1 — prices are still up nearly 17% year over year. 

India’s erratic monsoon rains this season are expected to cut into the country’s ongoing sugarcane harvest. The country, which has banned sugar exports to contain domestic food price inflation, also announced plans to encourage a reduction in the amount of its sugarcane crop diverted to ethanol production to boost its sugar supplies. 

India has also imposed export restrictions on other commodities to control domestic inflation, including some types of rice, onions, wheat, and wheat flour.