Brazil’s late cane harvest could catch NY sugar traders by suprise

According to commodity traders and analysts, the likely late cane harvest in the center-south region of Brazil may catch some sugar futures players in New York off guard. A dry spell in December and January, followed by heavy rain in March have delayed development of the 2019/20 season cane crop. This may lead to some mills holding off crushing while the cane develops further from the late rainfall. According to Archer Consulting, “If that happens, we will see traders running to deal with that lack of available sugar.” Moreover, those traders that have already sold sugar may have difficulty in finding supplies.

Brazil holds the trump card in the global sugar market with the ability to easily increase or reduce the pace of cane processing, or channel more raw materials to produce ethanol instead of sugar. If the Brazilian mills indeed delay production, the supply of sugar for May futures is likely to be severely restricted. There are a lot of speculations on how much cane will be crushed towards the end of March and in April, according to Reuters.

Variation in the start of Brazil’s cane harvest has been high in recent years. The center-south region crushed 80m tons from mid-March to the end of April in 2016, less than 50m tons in 2017 and 67.7m tons of cane last year (producing 2.41m tons of sugar) during the same period. Forecasts for the same 6-week period in 2019 are less than last year, Reuters reported.

Brazilian sugar and ethanol consultancy, Datagro, have forecast a two-week delay to the first-crush due to high ethanol inventories and slow cane development. According to Unica, only 27 mills were active in the first half of March, compared to 50 during the same period last year.

Unica data displays Brazil’s sugar and ethanol production patterns for the last five seasons: 

The following DataLiner graph shows Brazil’s sugar export trends over the previous ten years:

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