(Bloomberg) -- The worst weather in decades in top sugar exporter Brazil will have a lasting impact on global sweetener prices that are already near four-year highs, according to the world's second-largest producer.
Sugar has been rising on concern that severe frosts and the worst drought in nearly a century in the South American nation will lead to significant losses in sugar production, exacerbating an already tight global supply outlook. The extreme weather has also boosted coffee prices and is fueling global food-inflation worries.
“We are getting into a boom cycle for the commodity prices,” said Pierre Santoul, chief executive officer in Brazil of France-based Tereos SCA. High sugar prices are expected to last as long as 18 months, he said.
Tereos's sugar-cane crushing may drop to the lowest level since the 2009-10 season, to 16.6 million metric tons, a 21% drop from the 20.9 million crushed in 2020-21.
Weather woes have triggered downward revisions in the Center-South production estimates to levels as low as 490 million metric tons, a 19% decline versus the previous crop. In the second half of July, sugar content in cane declined in the region from a year ago, while cane yield dropped 18%, the nation's sugar-cane industry group Unica said in report Tuesday.
Even as mills have sped up harvesting to avoid further cane deterioration, the extent of the decline in quality is still unknown, suggesting further crop downgrades are possible, Santoul said.
In addition to the frost, most of the sugar-cane fields in the Center-South have faced soil water levels of below 10%, compared with the 60% minimum required for crop development, according to Somar Meteorologia.
Tereos has taken measures to mitigate weather effects for next year's crop, such as additional irrigation, Santoul said. It also expects to escape the worst effects of a seedlings shortage that may reduce plantings in a “significant part” of the Center South, as the company has its own production.
The dismal scenario may get brighter if the weather improves by October and brings normal rains in the subsequent months, he said.
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