Higher prices for fertilizer and diesel, key inputs for agriculture, have increased the cost to produce sugar in the main producing countries including Brazil, the chief analyst of consultancy Datagro said on Wednesday.
Plinio Nastari said the cost of production of sugar in Brazil, the top global exporter, is currently the equivalent of a price of 18.63 cents per pound, having gained around two cents per pound in one year. With raw sugar prices in New York trading at around 15.30 cents per pound on Wednesday, no producer of sugar in the world is making money currently, the data showed.
Diesel and fertilizer prices have spiked due to the situation in the Middle East. According to Datagro, Australia is the next most competitive sugar producer in the world after Brazil at 20.02 cents per pound of production cost, with Guatemala at 20.25 and Thailand, another major exporter, at 21.33 cents per pound.
Nastari said during a presentation at the Citi ISO Datagro Sugar & Ethanol Conference in New York that this situation will lead to falling plantings of beet in the Northern Hemisphere and sugarcane in tropical areas such as Thailand, as farmers switch to other crops.
Datagro estimates the European Union's beet area to fall between 8% and 12% in the new season that starts in October. It sees sugar production in the bloc falling 8%. The consultancy estimates Thai sugar production to fall to 10.3 million tons in 2026/27 from 12 million tons in the previous season.
"We believe some cane area will be lost in Thailand due to low prices," said Jeremy Austin, director at sugar trader Sucden.
He said Thailand area could fall between 5% and 6%, with farmers switching to cassava.
"Fertilizer prices, especially nitrogen fertilizers, are expected to remain high even after the war, until there is a normalization of supply," said Nastari.
