Have a question? Contact us
Fill out the form and we will provide an answer or consultation as soon as possible.
Sugar mills in central-south Brazil are diverting more cane towards ethanol than sugar as wetter-than-normal weather lowers sugar concentration, making ethanol production more viable.
Heavy rainfall has delayed harvesting and prevented mills from increasing the sugar mix despite a more than 21% rise in raw sugar prices last month. Parts of Brazil’s sugar belt recorded their wettest winter in more than 100 years, according to the University of Sao Paulo.
Marcelo Bonifacio Filho, sugar analyst at StoneX, said weather has become a bigger factor than market prices in determining the sugar-ethanol production mix as the season nears its end.
A one percentage point shift in Brazil’s cane allocation towards sugar can add about 750,000 metric tons to global sugar supply, making the production mix closely watched by international markets.
Brazilian mills had favored ethanol earlier in the season amid stronger energy prices and weaker sugar prices. By early July, only 42.5% of cane was being used for sugar. However, the August rally in sugar futures has made sugar production about 20% more profitable than ethanol, according to Veeries’ Fabio Meneghin.
GSX Commodities said higher sugar output could cap the recent price rally, while continued rainfall and harvesting disruptions could push prices higher by limiting supply.
StoneX has cut its central-south Brazil sugar production estimate below the 40 million metric tons projected at the start of the season and sees output potentially falling below 38 million tons. Further downgrades are possible if heavy rainfall persists, senior analyst Michael McDougall said.
Brazil is the world’s largest sugar producer and second-largest ethanol producer, making its sugar-ethanol production mix crucial for global sugar supplies.
More details: https://www.chinimandi.com/brazil-rains-limit-shift-to-sugar-despite-21-rise-in-raw-sugar-prices/