Analysis Sugar
Impact of fires on sugar production uncertain
In Brazil, fires broke out on various sugarcane plantations over the weekend. This seems to be directly reflected in sugar prices, especially on the New York Stock Exchange. The American listing rose significantly.
Sugar prices are still relatively low, but have been showing an upward trend for a week now. Last Tuesday (August 20), sugar in New York was priced at $387.35 per ton and in London at $502.50 per ton. New York reached its highest point since July 30, and London reached its highest point since August 9. The prices are still relatively low.
Disturbing images show wild flames raging across the sugarcane plantations of Brazil. Dry and hot weather conditions fueled the fire, scorching large parts of the country's sugarcane plantations. It is still unclear how many hectares have been affected, with widely varying figures being mentioned. The extent of the impact on sugar production is therefore still uncertain. According to Reuters news agency, burnt sugarcane can still be processed, although the sugar yield is lower. This processing must be done quickly to prevent quality loss.
The concern over the damage to Brazilian sugarcane cultivation currently seems to outweigh the ongoing rainfall in India. This is positive news for the market, as rain is beneficial for sugarcane cultivation. For example, yesterday saw 6% more rain than usual. This increases the likelihood of higher sugar production. India is the world's third largest producer. The current monsoon rains have delivered more millimeters in August than the monthly average so far.
The Brazilian Conab has revised down Brazil's production expectation for the current marketing year by 0.6% to 46 million tons. The lower production in the main production region is said to be due to less rainfall and higher temperatures. Earlier, market agency Czarnikow revised down its expectation for global production, as the drought in Brazil is believed to have caused more damage than previously thought.
On the other hand, Brazilian sugar production in the main region was 8% higher at 20.75 million tons until the end of July compared to the same period last year. However, it remains to be seen what impact the recent fires will have on sugar production in the following period.
