Brazilian mills have already promised more than 20 million tons of sugar from the 2021/22 harvest

Two and a half months before the beginning of the 2021/22 sugar and alcohol harvest in April, Brazilian mills already have a record sugar export share estimated for the season, with prices fixed in the futures market. Average prices are at higher levels than a year ago, which favors yet another cycle of growth in revenue from commodity shipments.

A survey carried out by Archer Consulting points out that until December 31, 17.25 million tons of sugar had an export price fixed for shipments from April 2021 to March 2022. One year ago, the volume of the next harvest with a negotiated value was less than half, 6.8 million tons. Price is set by the mills in the sugar and foreign-exchange futures market through trading companies, not with final buyers.

Considering the consulting firm’s export estimate for 2020/21, Brazil has already negotiated 69% of next season’s shipments, while a year ago the volume fixed in advance represented 35% – within the average of previous harvests. The share of exports that are already guaranteed for the next harvest is the largest in the history of the consulting firm, which began in 2012/13. In turn, the English trading company Czarnikow estimates that the volume of sugar with a defined price for the next harvest is even higher, between 20 million and 21.5 million tons, which corresponds to 75% to 80% of its export estimate. These volumes are close to total shipment levels from Brazil in recent periods. In the 2019/20 harvest, for example, the country exported 19 million tons. In the calendar year 2020, sugar sales until November reached US$ 7.9 billion, which corresponded to 4% of all Brazilian shipments in the year. In 2019, the share was just 2%. And the only reason the pace of sugar commitment for export for 2021/22 is not stronger is that many mills have been holding back operations to see if the summer rains help to recover the damage that the drought caused to the cane fields last year.

According to an executive at a foreign-owned company, it will be necessary to wait until March or April to see whether the rains have normalized and the productive potential of the sugar cane can be recovered. Also, he says, this rebalancing of crops can mitigate the effects that contribute to rising prices.

Source: Valor Econômico

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