Mar 31 / Lívea Coda

Brazilian crushing and rainfall drove price correction

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"During the past week, the bears took control of the sugar market, causing prices to retreat to 18.96 c/lb after briefly reaching 20 c/lb the week prior, marking a nearly 4% drop week-on-week. This trend was influenced by rainfall in the Brazilian Center-South, alleviating concerns about a dry February and early March, and strong sugar cane crushing as reported by Unica. With favorable weather predictions and Brazil's expected healthy crop, we remain optimistic regarding 25/26. Though volatility may arise from developments in other producing countries, a healthy result from Center-South could smoothen out some of these impacts."

Brazilian crushing and rainfall drove price correction


  • Prices dropped to 18.96 c/lb after briefly reaching 20 c/lb the previous week, marking a nearly 4% week-on-week decline.

  • Rainfall in the Brazilian Center-South alleviated concerns about a dry February and early March, contributing to the price drop.

  • Unica reported strong sugar cane crushing, suggesting a robust 24/25 result with the possibility of exceeding 620 million tons of cane.

  • Favorable weather forecasts for April, May, and July indicate a positive outlook for the Brazilian 25/26 crop, restricting price support.

  • Brazil's increased share in the international trade market rose its importance regarding price volatility, being able to smoothen out, or worsen, the impact that other regions could drive.

  • We are approaching the time of year when the market monitors both the start of the Center-South crop and the development of crop conditions in the Northern Hemisphere

During the past week, the bears took control of the sugar market. Prices retreated after briefly reaching 20 c/lb the week prior. Following four consecutive reductions, raw sugar closed on Friday, the 28th, at 18.96 c/lb, marking a nearly 4% drop week-on-week. Therefore, it is interesting to understand why the sweetener has faced such resistance at the 20 c/lb level and what could still support its price.

One of the main reasons behind this trend was the rainfall recorded in the Brazilian Center-South, which possibly alleviated some concerns regarding dry conditions in February and first half of March. 

Image 1: Cumulative Rainfall Estimated to Center-South (mm)

Source: Bloomberg, Hedgepoint

Additionally, the Unica report brought some interesting insights. Firstly, sugar cane crushing was strong, leading to a more robust 24/25 result and suggesting that it might even be possible to exceed 620 Mt cane, especially with some mills starting earlier than the market's expectations. With a total of 37 operating mills in the Center-South and another 19 set to begin their 25/26 season later this month, concerns about a poor start were reduced. Combining all this information, we remain quite optimistic about cane volume for the next season, at 630Mt. However, the February dryness shouldn't be overlooked, and monitoring April's precipitation is essential to determine if revisions will be needed.

Image 2: Bi-weekly cane crushing at Center-South mills (Mt)

Source: Unica


Looking at the weather forecast for the next months, Inmet shows average expectations for April, May, and even July. Of course, it is difficult to peg, and long-term weather predictions are often not 100% accurate. Considering that we are in a neutral year – ENSO-wise – it is likely that precipitation will indeed converge to the average, which would be favorable for the 25/26 crop going forward.

Image 3: Long-term precipitation anomaly forecast (mm)

Source: Inmet



As discussed in previous reports, this means that Brazil is expected to have another healthy year and aid the market in terms of sugar supply. However, combining this trend of good results in Brazil with a poor recovery in the Northern Hemisphere, we see that Brazil is gaining share in the international trade market, making news regarding its development a source of volatility.

This doesn't mean that news and rumors from other countries wouldn't impact the market – for example, the discussion of a possible export ban from India. However, depending on the predicted output from the Center-South region, the gains and losses to raw sugar prices resulting from news related to other producing countries could be mitigated.

Image 4: Brazilian share on total exports (%)

Source: Green Pool, Hedgepoint

For instance, we are approaching the time of year when the market monitors both the start of the Center-South crop and the development of crop conditions in the Northern Hemisphere. While the former can be tracked through Unica reports, the latter depends on weather and its predictions, which will become clearer by the end of May.

If we have a good monsoon formation, it could mean better cane development in India and Thailand, leading to some output recovery and an intensification of Brazil’s bearish trend. Of course, India's participation in trade flows is highly dependent on government decisions, which are closely linked to ending stocks and the ethanol blending program. So far, the weather is predicted to be favorable, so our numbers consider some exports coming out of the country after February 2026, as an increase in Thailand’s availability as well.

However, if monsoon formations are not favorable, it would mean another year of lower availability from the Northern Hemisphere, leading to a more bullish trend for prices on a tighter Q1/Q2-26. Nevertheless, given the expected healthy results in the Center-South, this trend would be mitigated, as stocks could still be sold during the intercrop.

Image 5: Total Trade Flows (‘000tq)

Source: Green Pool, Hedgepoint

In Summary

During the past week, the bears took control of the sugar market, causing prices to retreat to 18.96 c/lb after briefly reaching 20 c/lb the week prior, marking a nearly 4% drop week-on-week. This trend was influenced by rainfall in the Brazilian Center-South, alleviating concerns about a dry February and early March, and strong sugar cane crushing as reported by Unica. With favorable weather predictions and Brazil's expected healthy crop, we remain optimistic regarding 25/26. Though volatility may arise from developments in other producing countries, a healthy result from Center-South could smoothen out some of these impacts.

Weekly Report — Sugar

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

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