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Month-long sugar slide pauses amid concerns over Brazil’s supply
Ole Hansen
Head of Commodity Strategy
Over the past week, raw cane sugar futures traded in New York have surged more than 8% due to a sudden and potential deterioration in what was previously an ample supply outlook. Last November, sugar prices hit a 12-year high amid tight global supplies after India and Thailand, two major exporters, curbed their supply to protect local stocks and control inflation. However, the prospect of a record sugar crop in Brazil, the world’s top exporter, triggered a month-long price slide, which only paused last week when prices returned to USD 0.175 per pound—a level that has held firm on several occasions since 2022.
Since Friday, prices have jumped back above USD 0.19 per pound following an unprecedented outbreak of fires across sugar-cane fields in Brazil. While it is too early to fully assess the impact, traders expect that global sugar supply may be negatively affected in the coming months until additional production from Thailand and India can contribute to supply, beginning around November.
Bloomberg recently reported: “São Paulo, responsible for producing most of the country’s sugar, is facing a record number of fires due to low humidity and a blistering heat wave. There were as many as 2,000 outbreaks this weekend, according to the sugar cane industry group Orplana. Although subsequent rains have helped reduce the risk of new outbreaks, as much as 60,000 hectares of crop area were affected.”
The overall impact might still be relatively small, with experts suggesting that the burned sugar cane can still be harvested and processed. However, mills will need to act quickly as the cane begins to lose quality just a few days after burning.
The weekly chart suggests some consolidation after prices once again found support around the critical USD 0.175 per pound level. Recent price movements are likely driven by speculators unwinding short positions, which were established in an attempt to push prices below this support level. For the rally to indicate a true turnaround, the price would need a weekly close above USD 0.19 per pound, followed by reclaiming the USD 0.2070 per pound level, a break above which may confirm a double bottom formation.
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