Sugar production in South-Central Brazil could fall by up to 20%

RIO DE JANEIRO, BRAZIL – Brazil’s sugar production could fall by up to 20% in 2021-22 as dry weather impacts productivity, threatening to reduce sugarcane volumes to the lowest level in a decade, according to one of the world’s largest commodity traders.

With drier-than-normal weather in the state of São Paulo since last year, sugar production in the center-south region could fall to 31 million tons in the 2021-22 season, according to a Wilmar International report.

The volume compares to last season’s estimate of 38.5 million tons.

“The dry weather forecast is expected to continue over the next 30 days, and we could reduce our crop projections further if the lack of rain continues to stress the harvest,” Karim Salamon, head of sugar market analysis at Wilmar, which is based in Singapore, said in a phone interview.

São Paulo, which accounts for 68% of the region’s total cane production, has seen the driest weather in two decades in five of the six months through March, and yield declines could reach 20% in some areas Salamon estimates.

The risks for the harvest in the world’s largest producer of the commodity also sustain raw sugar prices, which reached a six-week high in New York last week.

Sugar has accumulated a 5% rise since January.

While lower cane production may reduce Brazil’s sugar supply, the final amount will also depend on how much juice is diverted to produce ethanol.

This, in turn, is also very much contingent on the outlook for energy prices and the recovery of domestic demand for ethanol in the country.