The sugar price rose sharply on Tuesday (August 10). The cause is a report confirming the frost damage and disappointing sugar production in Brazil.
Sugar production in the central and southern regions of Brazil fell by 11% to 3 million tons in the second half of July, industry association Unica reports.
That is a larger decrease than previously assumed. The sugar cane suffered greatly from 3 cold waves in June and July. And the crop was not looking too flourishing after the worst drought in 90 years. The sugar cane yield per hectare is 17,9% lower than in July a year earlier. Due to the frost, the factories were forced to harvest the cane before the desired time.
Smallest processing in 12 years
Unica's disappointing harvest forecast was - coincidentally or not - also confirmed by Tereos SCA. The world's second largest sugar producer announced on Tuesday that it expected to process 1 million tons of sugar cane this season. That is 16,6% less than in the previous season and the lowest processing figure in 21 years.
Traders already expected lower sugar cane production for the second half of July, but the additional frost damage revealed by the figures is much higher than most analysts assumed. The price of the sugar futures contract on the ICE exchange in New York rose by more than 6% due to the news and reached the highest point in almost 4,5 years.
European price movement remains limited
The news of a disappointing sugar harvest in Brazil has less influence on the European sugar market. The quotation for white sugar on the European stock exchange in London rose to 4%, which equates to €399,23 per tonne, the highest level in just six months.
In the Brussels sugar consultations more than a month ago, this possibility was discussed shortage of sugar in the EU partly due to strong competition on the global market for the production of fuels. It is possible that the reports from Indian sugar manufacturers on July 14 about a larger sugar harvest in India will dampen the European market somewhat.