Sugar industry sees profitability soar in 2023 as strategic stocks deplete

Brazil’s sugar industry is relishing a promising year in 2023, thanks to heightened demand fueled by the ongoing conflict between Russia and Ukraine, particularly in Europe. Concurrently, several countries seeking to fortify their strategic reserves have experienced a decrease in the sugar supply. This situation has presented a profitable opportunity for exporters, especially those in Brazil, who benefit from favorable exchange rates.

Moreover, the global ramifications of the war, including its impact on oil prices and supply, have pressured the demand for ethanol and other biofuels. Consequently, ethanol sales have seen substantial growth. Against this backdrop, sugar producers operating convertible mills are strategically determining whether to prioritize sugar or alcohol production in the upcoming sugarcane harvest projected for the 23/24 season, estimated to yield a total of 637.1 million tonnes.

According to the initial forecast released by the National Supply Company (Conab) in April, sugar production is expected to reach 38.77 million tonnes during the 23/24 harvest year, marking the second-highest recorded volume since the record-breaking 20/21 season, which yielded 41.25 million tonnes. Conab’s forecast highlights the greater utilization of sugarcane for sugar production compared to ethanol and alcohol.

Furthermore, ethanol supply is anticipated to grow by 5.9% compared to the previous harvest year, potentially reaching 33.17 billion liters. On the other hand, traditional ethanol derived from sugarcane is projected to increase by 0.6%, with the majority share comprising 27.53 billion liters.

See below the volume of sugar exported by Brazil month by month, from January 2020 to March 2023, according to the DataLiner data tool.

Brazilian sugar exports | Jan 2020 – Mar 2023 | WTMT

Source: DataLiner (click here to request a demo)

“We are seeing more attractive prices for sugar in the international market due to the lower supply of the product in major producing countries. This scenario indicates that the Center-South region of Brazil should increase production and revenues from sugar sales in the harvest that started in April this year,” says Luciano Rodrigues, director of economics and sector intelligence at the Brazilian Sugarcane Industry Association (Unica), emphasizing that ethanol supply should also grow. “More than a third of ethanol production is carried out by companies that don’t have the capacity to produce sugar,” recalls Rodrigues.

Since, domestically, sugar consumption remains relatively stable, around 10 million tons per year, the greater production should be directed primarily to the international market, according to Unica. In the agricultural cycle ended in April, the amount of sugar exported was 27.7 million tonnes.

Source: Valor Econômico

To read the original article, access: https://valor.globo.com/publicacoes/especiais/agronegocio/noticia/2023/05/15/demanda-global-por-acucar-indica-maior-lucratividade.ghtml