Wet Weather Forces Brazil Sugarcane Mills to Prioritize Ethanol
Brazilian sugarcane processors are prioritizing ethanol over sugar production as record winter rainfall reduces sugar concentration despite surging global raw sugar prices.
Sugarcane processors in center-south Brazil are prioritizing ethanol production over sugar, even as raw sugar prices surged 21% in August. Although market prices currently favor sugar by approximately 20%, wetter-than-normal weather linked to El Niño has increased moisture in the cane. This has reduced sugar concentration, making the crop more suitable for fuel production.
StoneX Group analysts lowered production expectations for the region to potentially below 38 million metric tons, down from an initial estimate of 40 million metric tons. The University of Sao Paulo reported that parts of the sugar belt experienced the wettest winter in over 100 years, which has caused significant harvest delays.
Market participants warn that global sugar prices could rise further if wet conditions persist. While the current price rally could be capped if mills increase the sugar mix, the prevailing climate conditions are currently preventing processors from shifting production away from ethanol.
