<\/p>\n
El Ni\u00f1o is hitting world\u2019s biggest sugar producers, exposing the crop\u2019s acute vulnerability to the climate phenomenon but also providing an early glimpse of broader threats to farmers and global food inflation.<\/p>\n
At the beginning of this year, the sugar market was facing a glut, but El Ni\u00f1o is driving a sharp reversal, with many analysts now expecting a deficit for the season starting this week. Raw sugar futures have surged more than 25% since July.<\/p>\n
For sugar, El Ni\u00f1o is a particular problem: intensifying rainfall in Southern Hemisphere growing regions, while accentuating drought north of the equator.<\/p>\n
The concentration of production in Brazil, India and Thailand \u2013 all countries exposed to the climate phenomenon \u2013 make sugar a leading indicator of wider crop damage, with El Ni\u00f1o only forecast to peak around the end of this year.<\/p>\n
\u201cSugar is one of the clearest El Ni\u00f1o-sensitive commodities,\u201d writes Leonardo Alencar, a S\u00e3o Paulo-based food, beverages and agribusiness analyst at XP Investimentos.<\/p>\n
\u201cWhen El Ni\u00f1o simultaneously threatens Center-South Brazilian cane performance and Asian exportable surplus, the market loses its main supply buffers, typically leading to a tighter global balance, lower inventories, and support for sugar prices.\u201d<\/p>\n
Read:
Food prices present fresh risk to global bonds after selloff
Will El Ni\u00f1o drought hit food prices in South Africa?
How an El Ni\u00f1o becomes a super El\u00a0Ni\u00f1o<\/p>\n
The sweetener has helped drive global food prices to the highest in more than three years. That\u2019s adding another inflationary concern for consumers and policymakers contemplating further monetary tightening amid the impact of wars in the Middle East and Ukraine.<\/p>\n
Excessive rainfall is slowing cane harvesting and crushing in top producer Brazil. In India, farmers are complaining of a weak monsoon curbing their yields, while a scorching summer in Europe is resulting in the worst sugar-beet harvest in more than a decade.<\/p>\n
Add in drought-hit Thai sugar regions and that represents more than half the global crop.<\/p>\n
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\u201cEl Ni\u00f1o is absolutely here with us,\u201d said Eder Vieito, chief executive officer of researcher Green Pool Commodity Specialists. \u201cLosses in sugar production have been significant across the board.\u201d<\/p>\n<\/p>\n
Sugar isn\u2019t the only crop feeling the effects of El Ni\u00f1o. Rice is also particularly vulnerable to weak rainfall across Southeast Asia. West Africa\u2019s cocoa groves are threatened by drier weather, while coffee and palm oil are exposed too.<\/p>\n
But as an early warning of El Ni\u00f1o impacts, sugar stands out.<\/p>\n
The growing threat posed by El Ni\u00f1o marks a sharp turnaround from just over seven months ago, when sugar hit a five-year low. Back then, before the Iran war and the emergence of the climate phenomenon, investors were betting that a big Brazilian crop was likely to further boost a global glut.<\/p>\n
The reversal in outlook is now also particularly marked in Brazil. Rainfall across several key growing areas was as much as four times normal levels over the past month, according to Donald Keeney, senior agricultural meteorologist at Vaisala Xweather.<\/p>\n
Read:
El Ni\u00f1o could push millions into acute hunger, UN warns
Global supplies of sugar, rice at risk from looming Thai drought<\/p>\n
That\u2019s interrupted harvesting and prevented mills from processing cane, compounding tightening supplies after the Iran war oil shock diverted more of the sweetener into fuel-making.<\/p>\n
After losing several days of crushing, mills may be unable to extend the season long enough to catch up because of expected rains in December, cutting exports by about 2 million tons, according to Jos\u00e9 Pessoa of the Jos\u00e9 Pessoa Group, a family business involved in planting and crushing of sugarcane in the Center-South and the Northeast of Brazil.<\/p>\n
\u201cWhen delays happen, mills tend to try and extend crush through December. But this year, this will not be possible,\u201d said Pessoa. \u201cWe won\u2019t be able to prolong crush and it\u2019s El Ni\u00f1o\u2019s fault.\u201d<\/p>\n
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By contrast, rains have been below normal in India. The world\u2019s second-biggest producer just capped its weakest monsoon rains since 2015, reducing projected sugar output to about 30 million tons.<\/p>\n
There are signs that stocks that built up because of the glut are starting to tighten, meaning India has little cushion for another disappointing crop, said Green Pool\u2019s Vieito.<\/p>\n
Thai producers are also struggling. Rainfall in northeastern Thailand, the country\u2019s biggest sugarcane-growing region, has been running at about two-thirds of the 30-year average, according to Vaisala.<\/p>\n
That\u2019s likely to cut sugar output by at least 17% to less than 10 million tons in the coming season.<\/p>\n
\u201cThe situation on my sugarcane farm is very terrible, affected not only by drought but also by sugarcane diseases,\u201d said Suntorn Nongkhunsarn, a farmer in Kalasin province.<\/p>\n<\/p>\n
Even in beet-producing regions in the Northern Hemisphere, El Ni\u00f1o is adding to the risks. Drought in the US has delayed beet harvesting in some regions, potentially exposing the crop to adverse weather as El Ni\u00f1o intensifies through the end of the year, according to Expana\u2019s Andraia Torsiello.<\/p>\n
In Europe, El Ni\u00f1o likely amplified a series of heat waves that seared sugar beet fields, cutting output to the lowest in at least a decade and helping prices rebound from multi-year lows.<\/p>\n
Output in France, Europe\u2019s No. 1 producer, is on track to be the worst since at least 1980, after the region\u2019s hottest ever summer.<\/p>\n
Global sugar costs have climbed 18% this year, more than any other component in the United Nations\u2019 gauge of food commodity prices, bar vegetable oils.<\/p>\n
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The intensity of the potential El Ni\u00f1o disruption has caught the attention of traders. Open interest in sugar futures hit record highs this year, and hedge funds have amplified price gains by building their most bullish position in years.<\/p>\n
Read:
South Africa sugar lobby says record imports put jobs at risk
Global food prices risk spiking on worst-ever drought in Brazil<\/p>\n
\u201cThere\u2019s a lot of money betting on El Ni\u00f1o effects,\u201d said Carlos Mera, head of agricultural commodities markets at Rabobank. Speculative positioning may have pushed sugar prices higher than justified by fundamentals, he added.<\/p>\n
More broadly, that price rally may be capped by slowing demand growth as health-conscious consumers cut intake, food-makers reformulate products and the growing use of GLP-1 weight-loss drugs raises questions about longer-term demand for sweet foods, according to Stephen Geldart, head of analysis at sugar trader Czarnikow.<\/p>\n
Still, some analysts think prices could go higher as El Ni\u00f1o strengthens and supplies are strained further.<\/p>\n
Read: GLP-1: A threat to fast-food businesses?<\/p>\n
Citi research analysts led by Arkady Gevorkyan expect prices to climb about 20% over the next 12 months due to adverse weather, alongside inventories that are \u201csubstantially tighter than officially reported.\u201d<\/p>\n
\u201cStocks have been going down and down and down, and it gets to the point where if there\u2019s some unexpected hiccup somewhere, then where\u2019s the sugar coming from?\u201d said Judy Ganes, president of J. Ganes Consulting. \u201cIt leaves the market vulnerable.\u201d<\/p>\n
\u00a9 2026 Bloomberg<\/p>\n
#Super #Ni\u00f1o #set #turn #sugar #glut #deficit #season<\/p>\n","protected":false},"excerpt":{"rendered":"
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