Sugar prices soar, as Brazil mills focus cane on ethanol

(Agrimoney) – Sugar futures rebounded by more than 6% after data showed mills in Brazil’s key Centre South region continuing to lose ground against ethanol in the battle for cane.

New York raw sugar futures for March soared to 14.87 cents a pound at one point before easing back to 14.70 cents a pound in late morning deals, a gain of 5.1%.

The jump followed the release of data by Unica, the Brazilian cane industry group, showing that mills diverted just 42.2% of their cane to making sugar, rather than ethanol, in the Centre South in the second half of October.

That compared with expectation of a 43.1% figure, according to an analysts’ survey by Platts.

Although, with more cane processed than expected, actual sugar production came in at 2.17m tonnes, marginally ahead of market forecasts, the idea that sugar prices needed to fight harder to win their share of cane was deemed bullish, a London analyst said.

Sensitive market

“What the data showed is that mills are still taking every opportunity to manufacture ethanol rather than sugar from their cane,” the analyst told Agrimoney.com.

“This does create the perception that prices can rise without sugar looking overpriced.

“In current market conditions, even the slightest news, bearish or bullish, can provoke a big swing in prices.”

Ethanol record

Unica highlighted the strength of the Brazilian ethanol market, boosted by higher gasoline prices, with sales of hydrous ethanol – which is consumed neat rather than being mixed with bioethanol – hitting a record 1.7bn litres last month.

“The volume of hydrous sold in October is the highest ever recorded in the Centre South, exceeding by more than 5% the previous record of 1.61bn litres observed in September 2010,” said Antonio de Padua Rodrigues, the Unica technical director.

Output of ethanol overall since the 2015-16 season began in April has reached 23.7bn gallons, a rise of 1.8% year on year.

Cumulative sugar output, meanwhile, is down 6.7% at 27.5m tonnes.