Sugar Price may Soar after Brazil Uses Cane for Ethanol Production

Sugar cane growers are speculating if the world market price of sugar will rise to over 20 cents per pound or not as they hope it to be higher at the beginning of 2022/2023. The Thai Cane & Sugar Corporation Co. Ltd. (TCS) has already sold 40% of sugar despite expensive costs and the harsh price of fertilizer, causing low profits.

On 20 April 2022, Mr. Narathip Anantasuk, the chairperson of the Office of the Sugar Cane Growers Federation of Thailand, reported that sugar cane growers had closely monitored raw sugar prices and found that the latest delivery prices for October 2022 had increased up to 20.31 cents per pound from the beginning of the year when the average price was over 18 cents per pound. This is because Brazilian sugar factories, the world’s largest sugar exporters, turned to ethanol for higher profits due to rising crude oil prices amid the Russia-Ukraine conflict. Nevertheless, the global average price of raw cane sugar remained at a high level, which would affect positively the initial sugar cane price level of the 2022/23 production season.

“The main factor causing the world sugar price to rise is the decline in Brazilian sugar production due to the shift to ethanol production, resulting in lower sugar in the market, but, in terms of sugar output this year, Brazil’s sugar production still reaches approximately 7% higher than last year, or estimated 34.5 million tons,” addressed Mr. Narathip.

In the sugar cane crushing season 2021/22, which began on December 7, 2021, 53 factories have completed the work, leaving about 4 factories to accept the remaining sugar cane. Most of them are situated in northeastern Thailand. The 4 factories had to stop their production temporarily due to rains, but it is expected to complete crushing by April 2022. At present, over 91.7 million tons of sugar cane have been crushed while the amount of sugar cane might reach between 91.9 and 92 million tons.

“This year, although the amount of sugar cane is large, I have to admit that the yield per ton of sugarcane was not good if we compare it with the previous year due to rains during the harvest. Farmers had to hurry to work, so sugar cane leaves might not be combed out, resulting in some contaminants. However, in the 2022/23 harvesting season, early rains will be beneficial for the growth of sugarcane stumps. It is expected that the yield will return to 100 million tons again,” added Mr. Narathip.

The TCS chairperson is concerned with the expensive costs of fertilizer and chemical substances for the sugar cane crushing season 2022/23. Fertilizer prices are unlikely to drop as long as the Russian-Ukrainian war is not over. At the same time, the oil price situation must be monitored together with various wages which may increase that the end of the year when the harvesting season begins. These are causes of higher production costs. Therefore, although the trend of raw sugar prices in the world market becomes higher, if compared to the high costs, cane growers may not receive much income at all.