By IFCMarkets

Expected rise in Brazil exports bearish for sugar price

Mills in Brazil are capable of switching cane toward sugar or ethanol production, depending on market prices. Low crude oil prices make production of bioethanol from sugar cane a less attractive alternative for sugar mills compared to production of sugar. And weaker currency of Brazil – real, makes switching from bioethanol to sugar production more profitable for Brazil’s mills as ethanol is mostly sold domestically while sugar is being exported, earning appreciating dollars for exporters. Brazil’s mills allocated an all-time low amount of cane for sugar last two years – around 34%, as ethanol gave them higher returns. Copersucar, the world’s largest sugar co-op, estimates mills will allocate 46% cane for sugar in the new season. This will increase Brazil’s sugar export by around 10 million tons. Brazil is the top global sugar producer. A rise in sugar supply is bearish for sugar prices.

Summary of technical analysis

Market Analysis provided by IFCMarkets