What can we expect from the 2023/2024 sugarcane harvest?

Brazil is the absolute world leader in sugar production, exporting more than all Northern Hemisphere exporting countries combined. Thus, there’s always keen anticipation on what the weather will be like, to know if the crop will post good results.

The most recent numbers are positive, showing a rebound to values prior to the 21/22 break. “There was a big break in the 21/22 harvest. In 22/23, we experienced a partial recovery. This year, we expect that the yield in the Center-South region, responsible for 90% of Brazilian production, should approach pre-crash values,” explains the Coordinator of Market Intelligence and Sugar and Ethanol Specialist at hEDGEpoint, Lívea Coda.

This year, the projection is to reach 595 million tons of sugarcane. Last year, the amount was 548.2 million. Lívea explains that this was due to droughts caused by the La Niña effect in 2021/2022. Sucrose production was high, but frost and burning, characteristic of dry weather, harmed a large part of the sugarcane crop. “Unlike a soy crop, which is fully harvested and then planted again, sugarcane is cut, but is still there. Thus, it’s not possible to recover completely from one year to the next, as it was very damaged and needs to be renewed,” she explains.

This year, on the other hand, we’re facing a forecast of the El Niño phenomenon that will impact world agriculture. You can see below what the impacts on sugar production and other market prospects may be.

How does the sugar market work?

In Brazil, the sugarcane harvest begins in the first half of April and lasts until March of the following year. The other major sugarcane producers are located in the Northern Hemisphere. So, the harvest there takes place from October to September of the next year.

As a result, Brazil supplies the world demand for a good part of the year, which is interspersed with the opposite hemisphere. Thus, when the weather is within the norm, and everyone’s producing well, there’s sugar all year round, as one crop complements the other.

Normally, the climate in the country’s Center-South, where most of the Brazilian production is concentrated, is dry in winter. This favors the production of sucrose, making it possible to extract more sugar from the cane. But if there’s a rainy winter, as expected, it can affect the quality of the sugarcane.

Another variable that contributes to the amount of sugar produced concerns another process: milling. The mill owner decides whether to transform the raw material into sugar or ethanol, analyzing which will be the most advantageous path for them. “Currently, sugar is paying more than ethanol on the market, generating a tendency to maximize production of the sweetener,” Lívea notes.

Heavy rains in winter can add a roof to the sugar mix. Since it harms the quality of the sugarcane, interfering with the concentration of sucrose, a larger part of the sugarcane can be converted into ethanol than was initially planned by the mills.

Future Perspectives for Sugar

The current harvest is expected to present a great recovery after the 21/22 break. With an expected sugarcane harvest of 595 million tons, it points to a maximum sugar harvest, with up to 48% of sugar produced.

This number is very high when we take into account the limitations of the mills, and the quality of the sugarcane. It’s estimated that we’ll see 137.8 kilograms of ATR (total recoverable sugar) per ton. Last year, we had 140 ATR, but with a smaller sugarcane crop, and thus, a reduced sugar volume.

Hence, the market is betting on the recovery of the Brazilian harvest, with the main concerns focused on other producing countries. “If we have another year of adversity in the Northern Hemisphere, especially in Thailand and India, Brazil’s strong performance won’t be enough to balance the surplus for the year 23/24, October-September,” emphasizes Lívea.

The scenario can be considered positive so far for the Brazilian crop. “Brazil has recovered its pace and shown good results,” she points out. The only doubt is in relation to the commodity’s quality, which may or may not be maintained, depending on the climate. “The sugar premium in relation to ethanol is very high, as the expected sugar mix is 48%. But it could be lower if the rains arrive and severely damage the quality of the cane,” she reinforces.

How can you protect yourself from sugar market volatility?

Even when judging future possibilities, we know they’re just trends, as it’s simply not possible to predict or avoid real events. Weather storms, political and economic changes at a local and global level, and unpredictable events can’t be changed. But you can choose how to best deal with them.

In such a volatile market, it’s vital to plan well so that you enjoy more predictability and security for the future of your business.

The best way to manage risks and avoid losses in commodity markets is to rely on a hedging specialist and partner who has extensive knowledge of the agro market, as is the case with hEDGEpoint.

We combine the knowledge of specialists in different commodities with risk management products based on technology to always offer you the best experience in futures operations.

Speak with a hEDGEpoint expert today to learn more about how to use this tool to your advantage.