Brazil wants to produce more sugar, but the weather is getting in the way

Higher prices are boosting sugar production

In August, sugar prices rose by 21%, making sugar production more profitable than ethanol production. For Brazilian mills, this provides a clear incentive to allocate a larger portion of sugarcane to sugar production. As recently as early July, 42.5% of the processed raw material was being directed toward this purpose.

However, the price ratio alone is not enough to rapidly increase production. The high moisture content of the harvested sugarcane results in a lower sugar concentration, making this raw material more suitable for ethanol production. Additionally, heavy rainfall is delaying the harvest in some regions, further limiting the potential to increase the share of sugar production.

Weather may limit supply from Brazil

Even a slight change in the production mix is significant for the market. Each additional percentage point of sugarcane allocated to sugar production could mean an increase in supply of approximately 750,000 metric tons. However, if rains continue to hamper the harvest and the sugarcane remains more moist, the increase in production may remain limited.

In such a scenario, sugar production in central-southern Brazil may not exceed 38 million metric tons, whereas at the start of the season, approximately 40 million metric tons were expected. Toward the end of the harvest, it will be the weather and the proportion of sugarcane allocated to sugar and ethanol production that will determine how much raw material ultimately reaches the market.