The severe drought-like situation is prevailing in Brazil, which is likely to affect the global sugar price in the market. On Monday, sugar for February delivery on the Intercontinental Exchange finished up 6 per cent at 12.65 cents a pound. The sugar futures slipped after December, and the three-month low level reached 11.69 cents per pound.
According to the National Center for Environmental Prediction statistics compiled by Futures International, in the south and northeastern parts of Brazil, where sugarcane is grown generally, is suffering from drought. As a result, the market is expecting to slow down in these regions. According to the US Department of Agriculture’s foreign agricultural service, the estimated total exports of Brazil for the year 2018-19 is estimated at 19.6 million metric tonnes, which would be the lowest level since 2007.
Meanwhile, due to the diversion of sugarcane towards ethanol, the production of sugar in Brazil is likely to fall by 9 million tonnes from 194 million tonnes compared to last year.
As per a report in The Wall Street Journal, Pablo Gimenez, senior vice president of Latin American markets for INTL FCStone, said, “On Monday, the effect of the rise in sugar prices in futures markets was also influenced by factors including oil and equity markets. However, it is a dry weather situation which is standing in the long term to reduce the prices of high sugar.” According to the USDA, globally, sugar production is still higher than consumption.