High prices should keep production mix higher for sugar in 2021

Cepea, January 15, 2021 – Sugar production should be lower in the 2021/22 Brazilian season, considering that the volume produced in central-southern Brazil in 2020 hit a record, totaling 38.09 million tons, 44.16% up from that in 2019. Also, atypical weather conditions, such as the drought between September and October 2020, may reduce both the volume of sugarcane and the TRS value (Total Recoverable Sugar).

 

So far, the volume available for crushing in the 2021/22 season is expected to reach 585 million tons, according to companies in the sugar-energy sector. In the current season, central-southern Brazil had produced 594.88 million tons of sugarcane up to December 1st, 2020, according to Unica.

 

As regards TRS value, the drought favored the sugarcane harvested in 2020, but may have damaged the product to be harvested in 2021. In the partial of the 2020/21 season (April 1st – December 1st, 2020), TRS value per ton of sugarcane totaled 145.13 kilograms, and for 2021/22, expectations point to 138 kg of TRS/ton.

 

Favorable prices in the Brazilian market and valuations in the international market should keep production mix higher for sugar. Besides, many deals for exports have been closed, making it difficult for the production mix to be changed.

 

As for the dollar, if the American currency depreciates against Real, the advantages of exports will be reduced. On the other hand, uncertainties caused by the pandemic and lower interests, which do not attract international money, indicate that the dollar may continue firm.

 

Concerning sugar consumption, the changes observed in the world in 2020, primarily because of the covid-19 pandemic, may be extended to 2021. If other countries, mainly China, continues to import as much sugar from Brazil as it did in 2020, prices may be underpinned, favoring revenue from sugar exports. Besides, world inventories may have decreased because of production difficulties in many countries.

 

Indeed, fearing a lack of sugar, China did not renew in 2020 policies for safeguarding, which limits sugar imports. According to the USDA, the amount of sugar stocked in China is currently the lowest of the past four seasons. Thus, the Asian country may purchase high amounts of the Brazilian product in 2021.

 

(Cepea-Brazil)

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