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HomeIndustry & UpdatesSugar Rallies as Brazil Cane Fields Scorch, Ethanol Price Soars

Sugar Rallies as Brazil Cane Fields Scorch, Ethanol Price Soars

Sugar rose, trading near a four-year high, as dry weather scorches cane fields and record ethanol prices encourage mills to process more of their crops into fuel.

Dryness is reducing yields and eroding the outlook for sugar output this season and the next in Brazil’s Center South, the world’s largest producing region, according to Plinio Nastari, president of Sao Paulo-based agricultural research firm Datagro. The heat has recently triggered several wildfires.

Meanwhile, prices for ethanol produced from sugar cane in Brazil have reached repeated records after two years of drought, coupled will frosts last month, prompted mills to rush to cut their cane and crush it before it deteriorates further. The Center South is forecast to get mostly dry weather and high temperatures through the middle of next week.

Sugar for October delivery rose 0.8% to 20.17 cents a pound in New York. Futures reached a four-year high Wednesday and are up 30% for the year.

Datagro sees a world deficit of 910,000 metric tons in the 2021-22 season, following a 5.5-million ton deficit a year earlier. Nastari declined to provide his recently revised output figures for Brazil’s Center-South. Rabobank International said sugar could trade as high as 21.5 cents a pound, with ethanol prices likely to make mills reluctant to divert more cane toward sugar.

Still, Brazilian mills won’t have problems meeting commitments, Nastari said. India’s sugar exports are taking some of the market share. Plus, demand has been weak for Brazil’s product, as indicated by the current sugar-vessel lineup at ports, only about half of what it was a year earlier, he said. That’s reflected in a wider discount for October versus March futures.

In other soft commodities, arabica coffee rose 0.3% after slumping 2.3% on Tuesday. Cocoa advanced 0.9% as much as 1.3% to $2,681 a metric ton, the highest for a most active-contract since December.

The above news was originally posted on finance.yahoo.com

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