Heavy Rainfall Delays Sugarcane Harvesting in Brazil, Leading to Elevated Prices

Recent heavy rainfall levels in Sao Paulo, the largest sugar-producing state in Brazil, accounting for over 50% of the country’s white crystal sugar production, have led to delays in sugarcane harvesting, impeding sugarcane crushing and decreasing the supply of white crystal sugar in the country. According to data from the Center for Advanced Studies in Applied Economics Department of Economics, Administration and Sociology (CEPEA), some buyers, due to the fear of running out of sugar, are rushing to purchase the product at higher prices.

Source: Tridge, CEPEA

As a result, white crystal sugar traded higher in the Sao Paulo market over the past week. According to the CEPEA, the CEPEA/ESALQ indicator for white crystal sugar (Icumsa colour 130-180), rose to BRL 139.98 per 50 kg in April, up 6% from BRL 132.00 per kg in March. This was also the highest average price in close to a year.

A similar scenario has played out in Santos, where average white crystal sugar prices rose to BRL 142.97 per bag in Apr-23, up 4% from BRL 137.58 per bag in March and 13.6% more than the price in April 2022. On the 26th of April, the white crystal sugar indicator ESALQ/BVMF in Santos rose to BRL 148.65 per kg, a 4.2% WoW increase and the highest daily price in close to 18 months.

The elevated sugar prices are enticing sugarcane crushers to crush more sugarcane this season, to take advantage of the higher crush margins. For example, Tereos SA TEREO.UL, one of the leading global sugar groups, is set to increase its sugarcane crushing in Brazil by 10% to 19 million mt in 2023/24, resulting in a total sugar output of 1.7 million mt, up 6.25% YoY. According to CEPEA, some suppliers may also be motivated to withhold from selling and wait for prices to go even higher before they sell, thereby adding to the white crystal sugar supply shortage in the country.

Tridge expects the bullish trend to persist over the next two weeks owing to forecasted wet conditions. According to the World Meteorological Organization and Instituto Nacional de Meteorologia in Brazil, moderate rains and thunderstorms are expected in Sao Paulo during the next fourteen days. As a result, there could be further delays in harvesting and sugarcane crushing, which could keep white crystal sugar supplies limited.

The sugarcane harvest in Brazil's south-central region began in April and is expected to progress until December, however, further delays in harvesting could significantly impact the country's sugar output for 2023/24.