The prolonged expectation of Brazil entering one of the longest between-crops periods due to severe drought and farmland fires has prompted a significant shift in the sugar market. Speculators, who had been betting against sugar prices, have begun to cover their short positions, resulting in a nearly 20% surge in raw sugar futures—the largest weekly gain in 16 years.
As the world’s largest sugar producer, Brazil contributes approximately 70% of the global sugar export trade. This year’s historic drought has forced mills to accelerate harvesting, leading to an early end of sugar production expected by late October, with the next season not resuming until mid-April or May 2025.
Arnaldo Correa from Archer Consulting noted, “We are going to have six months without sugar production.” This significant reduction in supply comes as Brazil has contributed 37 million tons of sugar to the global market in the past year, maintaining a stable market before the current crisis.
Consultants estimate that Brazil’s Centre-South region will have only 790,000 tons of sugar in stocks by the end of the first quarter of 2025, a critical low that raises concerns about global supply. The situation is exacerbated by India’s ban on sugar exports to secure local supplies, further increasing Brazil’s market share.
Market analysts predict that funds have shifted to a net long position, with estimates around 60,000 contracts in New York. The Commodities Futures Trading Commission (CFTC) reported a reduction in short positions, indicating a change in market sentiment as traders brace for potential price hikes ahead of the holiday season.