We think CS Brazilian sugar production will fall by 6% to 36m tonnes in 2021/22.
Mills will still maximize sugar production – it is just that the amount of cane available for crushing is lower.
The amount of rainfall in the next 3 months are critical for cane evolution; further revisions are possible.

Concerned over volume of cane available

Cane development depends on precipitation being close to average.
Precipitation below normal can hinder crop evolution and lead to lower cane availability.
In the previous quarter, CS registered rains 26% below average – it was the driest Q4 of the past 10 years.
Looking at each state we see that Mato Grosso do Sul, Goias and Parana take the front seat on lower rains with some areas registering half than average precipitation.

Not only was weather drier, but CS suffered substantially with fires in t he 2H of 2020.
The accidental fires damaged young cane fields, with some areas being lost or expected to show significant losses in agricultural yields.

In addition to dry weather and fires, UNICA has pointed out a potential reduction in cane area expected for 21/22 – our model also shows a potential decrease in area for next season as a result of lower cane planting.
Thus, the combination of lower ag yields and lower area should result in limited cane availability for 21/22.
Estimated crush at this time of 580mmt.

Nonetheless, we find it important to stress that the risks are not over.
As we say in Brazil: there is still a lot of water to come, meaning that rains in Q1 are essential to define cane volume for better or for worse.

Sugar Mix to Max Sugar

CS millers have hedged a record amount of sugar (futures selling) for this time of the year as they have ever been.
We reckon that at least 70% of 21/22 sugar production has been priced – just as a reminder, this time last year the view was still in favour to ethanol production.
No wonder mills have advanced their hedges, sugar returns are the highest they have ever been on a BRL/ton basis.

The mills’ strategy and intention are clear: maximize sugar output.
Assuming a sugar mix of 47.3% we expect CS sugar production to reach 36mmt in 21/22 season.

Keep an eye out for these!

Summary of Estimates

Ana Zancaner

Ana graduated from Insper University Sao Paulo in 2013, with a bachelor’s degree in business administration. She joined CZ as an intern in 2013 and is now our senior analyst in our Sao Paulo office. At CZ she is responsible mainly for analysis of the Brazilian sugar and ethanol sector but supporting other consulting requests as well.