Ethanol Demand Pushes US Raw Sugar Futures to 10-Year High as Weather Hits Harvests

Raw sugar futures in the US have continued to rise to over ten-year highs accelerating after breaking through the high from late February spurred on by a number of factors. Futures extending their rally to over $24.5 per pound in April, reaching the highest since March 2012. Disappointing harvests in some of the world’s largest producers India, China and Thailand from bad weather has hit sugar production in all three countries. At the same time China’s economy has begun to reopen following the end of coronavirus lockdowns.

Last week’s move came from sugars use in biofuel, in particular in Brazil for ethanol the surprise moves by OPEC+ to cut production triggered prices across the energy fuel structure. WTI oil futures rose 6.3% on the move, Brent futures rose 6.4% and gasoline futures rose 2.98%. Raw sugar prices surged over $22.4 per pound the following Monday, hitting six year highs.

Sugar was already higher before last week’s move, up 7% over the past week after Brazil’s new federal government ended its tax exemption program for gasoline, raising demand for lower-taxed sugarcane ethanol and adding to the momentum for biofuel blending. Crop damage and unfavorable weather in Thailand and India pressured output projections from other major producers

Refined Sugar Prices

Refined sugar prices are surging. White-sugar futures have moved up by 20% this year through Thursday, to $663.80 a metric ton, and recently hit their highest since October 2011. Chinese buying sees prices in China are up by about 16% this year, and food producers have been stockpiling supplies.

“We expect China to import significant volumes of sugar,” Mr. Mera at Rabobanksaid, pointing to strong retail-sales data.

Production Headwinds

“A lot of things have gone wrong on the production side,” said Peter de Klerk, senior economist at the International Sugar Organization.

With forecasts seeing a strong El Niño production faces further headwinds. ED&F Man. Dry weather conditions would see further yield risks for India’s and Thailand’s next crops.


Sugar output in India, the second largest producer, is estimated to fall to 33.5 million tonnes in the 2022-23 crop year from 34.5 million tonnes, according to All India Sugar Trade Association. From that the country may not approve additional sugar exports in the year ending September, India’s food secretary recently said. This year’s harvest ending abruptly.


The Thai sugar harvest was hit by heavy rain and soaring fertilizers, with the shortfall so big that most mills ended their refining season early, according to the International Sugar Organization. Thailand will fall about 1 million metric tons short of the 12 million metric tons previously expected, Rabobank estimates.


Production is expected to decrease China, with China cutting its forecast to less than 9 million tons from 9.5 million tons. The Chinese government blaming bad weather, pests and diseases.


Brazil, the leading producer, is expected to produce 40.3 million tonnes of sugar in the season that just started, the second-highest amount on record.

Ethanol Price Affect

Elevated ethanol prices due to OPEC’s surprise oil output cut encourage sugarcane producers to allocate crops to more profitable biofuel blending instead of sugar crushing. Prices are supported by expectations of higher biofuel demand and lower output from key producers. The move by OPEC+ encourages sugarcane producers to allocate crops to more profitable biofuel blending instead of sugar crushing and limiting the sweetener supply as a result.

Source: TC

From The TradersCommunity News Desk