Feb 29 / Lívea Coda

Crop Forecast: Sugar Center-South - 2024 02 29

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"While there is optimism that the Center-South region may surpass the 650-million-ton mark by the end of the 23/24 season, concerns are mounting regarding the outlook for 24/25."

Center-South Cane, Sugar, and Ethanol Production Update 

Before discussing our latest figures, it is important to talk about our forecast methodology. To best estimate cane volume, we update our expectations for area growth, yields and cane quality, considering key market sources such as Unica, MAPA, and Conab as well as realized weather, NDVI measurements and historical trends.

From cane availability, we draw sugar production. First, will mills be able to crush? Precipitation might induce lost days and slow crushing down. The second step is understanding mills optimization problem: sugar or ethanol? Sugar mix is set depending on which subproduct pays more.

23/24 Crop year

Regarding 23/24, last cumulative yield results reported by Centro de Tecnologia Canavieria (CTC) suggests that the region can achieve over 655Mt of cane and produce 42.4Mt of sugar. The index reached 87.5 t/ha, an impressive growth compared to last season’s 77.2 t/ha. Crushing all of its availability, 655Mt, leads to an increase in both sugar and ethanol volume. 

Image 1: Crop Summary

Source: hEDGEpoint

The lower precipitation levels have played a pivotal role in driving the record-breaking sugar output to 42.15 million tons, marking a substantial increase of 25.6% over the previous year and 10.3% compared to the 20/21 season.

While there is optimism that the Center-South region may surpass the 650-million-ton mark by the end of the 23/24 season, concerns are mounting regarding the outlook for 24/25. Diminished precipitation in key cane-producing regions suggests that TCH could experience a more pronounced correction than initially anticipated.
The difficulty in estimating Center-South’s output relies on the fact that rains were quite uneven and scattered throughout the entire region. While Ribeirão Preto, responsible for about 14% of Brazil’s total cane production, received well-below-average precipitation and remains at the lower end of historical values, São José do Rio Preto is close to average – as are many other microregions. 

24/25 Crop Year

Image 2: Cumulative Precipitation (mm) | Ribeirão Preto

Source: Bloomberg, hEDGEpoint

Image 3: Cumulative Precipitation (mm) | São José do Rio Preto

Source: Bloomberg, hEDGEpoint

We believe that it is still premature to peg a major crop reduction, but December and January’s dryness cannot be unaccounted for. As a result, we've adjusted our cane expectations downward from 620 million tons to 615 million tons. It's worth noting that there's still time for cane to mature, and mills have leftovers from the 23/24 season to start with. Additionally, the average age of the cane is lower than in previous years. There's potential for an upside if weather conditions improve in the coming days, but there's also a possibility of downside if the weather doesn't cooperate. Ultimately, the market is heavily influenced by weather conditions.

Image 2:

Despite revising our cane expectations down, a consistent market trend, reinforced by daily observations, has led to a slight increase in our sugar production estimates from 41.8 million tons to 41.9 million tons: a rise attributed to a higher sugar mix. It's noteworthy that the Center-South region has consistently maintained elevated sugar mix levels, surpassing record highs during 23/24. Given the reported investments in crystallization , it wouldn't be surprising if the region exceeds the 51% mark and reaches 51.5%. Therefore, despite a modest reduction in cane estimates, Center-South continues to contribute to bearish sentiment while offsetting much of the absence seen in the Northern Hemisphere.


Crop Update - Sugar and Ethanol

Written by Lívea Coda
Reviewed by Natália Gandolphi


This document has been prepared by hEDGEpoint Global Markets LLC and its affiliates ("HPGM") exclusively for informational and instructional purposes, without the purpose of creating obligations or commitments with third parties, and is not intended to promote an offer, or solicitation of an offer, to sell or buy any securities or investment products. HPGM and its associates expressly disclaim any use of the information contained herein that may result in direct or indirect damage of any kind. If you have any questions that are not resolved in the first instance of contact with the client (client.services@hedgepointglobal.com), please contact our internal ombudsman channel (ouvidoria@hedgepointglobal.com) or 0800-878-8408 (for clients in Brazil only).

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