Feb 7 / Lívea Coda

Crop Forecast: Sugar Center-South - 2025 02 10

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"In January, we updated our models and expectations for the 25/26 crop based on NDVI, rainfall, temperature, and soil moisture data. We expect 82 t/ha, translating to about 630Mt, compared to 617.7Mt in 24/25. The Center-South region is expected to have more sugar availability next season, with a higher sugar mix and comfortable biofuel stocks."

The Sugar Saga of 25/26: What to Expect

  • Hedgepoint updated its models and expectations for the Brazilian Center-South 25/26 crop based on data for NDVI, rainfall, temperature, and soil moisture.

  • Soil moisture improved in late 2024, remaining below average but better than 2023 levels; rainfall positively impacted cane development in key regions.

  • The intercrop period had temperatures 1.5ºC lower than the previous year, indicating a recovery in TCH, but poor cane condition in 2024 could limit the upside, as a marginal reduction to area.

  • Center-South region is expected to have more sugar availability next season with a higher sugar mix and comfortable biofuel stocks.

  • Indian domestic prices rose 4% in January, while raw sugar prices corrected, increasing export parity. If we exclude India's 1 Mt exports, trade flow in Q2-25 would show tighter availability, meaning its export parity is a good level for sugar in the near term.
With the data realized in January for NDVI (Normalized Difference Vegetation Index), rainfall, temperature, and soil moisture, we were able to update our models and thus, our expectations for the upcoming 25/26 Center-South crop.

Soil moisture recovered some ground during the last months of 2024, remaining below average but surpassing 2023 levels. Rainfall has been positive for cane’s development, reaching above average in key producing regions such as Ribeirão Preto, Triângulo Mineiro, Araçatuba, and others, pushing the CS average closer to the norm. This also positively affected NDVI, which showed healthier results than in January 2024 and 2023.

Combining all these with the fact that the intercrop period (between November and January) had temperatures estimated to be 1.5ºC lower compared to the previous year, our model indicated a potential recovery in TCH.

Image 1: Projected Area and TCH for Brazilian CS

Source: Conab, UNICA, CTC, Hedgepoint

However, the poor condition of the cane during 2024 could limit the upside, making it challenging to return to 23/24 levels. Nevertheless, reaching 82 t/ha is expected, which translates to a production of 630Mt of cane, compared to the expected 617.7Mt during 24/25 – a number that could still surprise upwards.

The limitation to cane figures could also come from a slightly smaller area. While Conab had projected a 4.4% increase in 24/25, fires and poor planting conditions might lead to a reduction from this level in 25/26. We are currently working with a 2% drop in area for the upcoming season. However, this is a critical point to monitor, as there has been some late planting in November, which could still surprise us.

 As a result, the Center-South region is expected to have more sugar availability in the next season. This is not only due to an increase in raw material but also because the sugar mix is expected to be higher. While sugar still pays quite a premium over ethanol, the increase in corn-ethanol production and the availability of more raw material make the biofuel stocks quite comfortable.
This is true even when considering a 2% growth in demand and the implementation of a 30% blending of anhydrous on gasoline starting in June. Therefore, there is no indication that mills could change their revenue maximization solution: they should still prioritize the sweetener.

Image 2: Cane Crushing per Fortnight in Brazilian CS (Mt)

Source: UNICA, Hedgepoint

Image 3: CS Total Sugar Exports (‘000 t)

Source: Source: SECEX, Williams, Hedgepoint


Image 4: Ahydrous (left) and Hydrous (right) Stocks (‘000 m³)

Source: UNICA, Hedgepoint

Adding to that, some investments that were made between 2023 and 2024 to crystallization capacity are expected to be fully operational, making it possible to reach 51% during 25/26. Of course, the main risk to this view would be another year of poor cane quality with higher reducing sugar concentration.

Nevertheless, as discussed earlier, weather conditions have improved. Typically, such quality issues are linked to short-term events. For instance, 2024 dryness affected the quality of that year's crop, and the higher concentration of reducing sugars wasn’t a result of any condition recorded in 2023. Therefore, we need to wait and monitor if we will have any anomalies that could bring the sugar mix down.

Image 5: Total Trade Flows (‘000t)

Looking at the current weather forecasts, especially regarding climate events, 2025 is expected to be a neutral year, neither a strong El Niño nor a La Niña is predicted. This trend usually brings weather closer to the norm and guarantees a healthier result.

However, there might be some incentive to start the crushing season a little later. Since there isn't expected to be any leftover cane, some mills might be willing to wait a bit longer for the cane to develop before beginning the crushing season. As a result, we could see exports picking up pace later, perhaps by the end of May. This is especially true when compared to 24/25, when the region had leftovers to start quite quickly and early. Therefore, trade flows can still be somewhat supportive until the next Brazilian season is up and running. Once Brazil starts crushing, prices might find themselves in a quite bearish stance.

Source: Green Pool, Hedgepoint

Until then, Brazilian availability is becoming scarce, nearing average levels during the offseason. This trend, combined with India's pursuit of higher prices to export the 1Mt allowed by the government, makes the domestic price from the Asian country the most supportive factor behind the recent uptrend.

Image 6: Center-South Supply and Demand Balance (Mt)

Source: UNICA, SECEX, Williams, Hedgepoint

Indian domestic prices rose by an average of 4% during January, pushed by lower stocks. Meanwhile, raw sugar prices fluctuated, but the March contract actually managed to drop by 2% over the month. As a result, the export parity rose sharply. For Indian millers to be indifferent between selling in the domestic market and contributing to trade flows, raw prices should be close to 19.7 c/lb. In terms of white sugar, the parity is open, but they are also reportedly asking for higher premiums.

If we exclude the 1Mt exports from India, Q2-2025 would show tighter availability. Therefore, the 19+ level could serve as a short-term floor. However, if demand is comfortable enough to wait for Brazil, the price might orbit around that value until it starts correcting.

Summary
In January, we updated our models and expectations for the 25/26 crop based on NDVI, rainfall, temperature, and soil moisture data. We expect 82 t/ha, translating to about 630Mt, compared to 617.7Mt in 24/25. The Center-South region is expected to have more sugar availability next season, with a higher sugar mix and comfortable biofuel stocks. Weather conditions have improved, and 2025 is expected to be a neutral year, bringing weather closer to the norm. Some mills might start the crushing season later, leading to exports picking up pace by the end of May. Until then, Brazilian availability is becoming scarce, and India's pursuit of higher prices supports the recent uptrend. Indian domestic prices rose by 4% in January, while raw sugar prices corrected. If we exclude the 1Mt exports from India, Q2-2025 would show tighter availability, with the 19.5c/lb level serving as a short-term floor. If demand waits for Brazil, prices might hover around that value until correcting.

Crop Update - Sugar and Ethanol

Written by Lívea Coda
livea.coda@hedgepointglobal.com
Reviewed by Laleska Moda
laleska.moda@hedgepointglobal.com
www.hedgepointglobal.com

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