Brazil’s driest summer in 70 years set to send sugar prices soaring
Brazilian cane-grower Jose Rodolfo Penatti can see evidence from his window that the world is heading for its first sugar production deficit in four years.
On the 150 acres his family has farmed in Sao Paulo state since the 1950s, stalks are half the normal height of more than 3m and brown rather than green, after a drought from January through March parched the Center-South region. “It’s the worst scenario I’ve ever seen,” said Penatti, who estimates he’ll lose 20% of his harvest.
The smaller crop in Brazil, the largest grower and exporter, will leave global sugar output 900,000 metric tonnes below demand in the 12 months ending September 30, and the shortfall may be bigger next year, said Bruno Lima, a senior risk-management consultant at FCStone do Brasil. Copersucar, a trader, predicts raw-sugar futures will jump 12% by year-end to 20 cents a pound. An extended rally may boost costs for buyers, including Nestle, while reviving profit for refiners after four years of surpluses forced dozens to close.
“The deficit has taken the market by surprise,” said Peter Sorrentino, who helps manage $3.8bn at Huntington Asset Advisors in Cincinnati. “It doesn’t take much variation on weather to have significant changes in harvest projections. The market has been down for so long, investors and the industry are also reacting to potential loss in capacity.”
- Bloomberg
