It’s a Bitter End for Sugar as Investors Line Up for 2019 Losses

Brazil, Business News/Analysis, European Union (EU), Feedstocks, Field/Orchard/Plantation Crops/Residues, India, Opinions, Policy

December 17, 2018

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(Bloomberg) … Millers could make more sugar as oil drop damps ethanol view … The one thing that kept the rout from being even deeper: robust demand for ethanol in Brazil, the world’s biggest sugar grower and exporter. But now that backstop looks like it’s going away.

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Cane millers can turn crops into either sweetener or biofuel. For a lot of 2018, high gasoline prices meant Brazilian processors favored making ethanol, helping to cap the sugar glut. The recent plunge for crude oil is signaling that trend is about to reverse.

Most drivers in Brazil own flex-fuel cars that can run on either gasoline or ethanol. Traditionally, consumers choose the alternative fuel when it’s below 70 percent of the price of gasoline because it yields less energy per liter. Now that crude oil is tumbling, the outlook for traditional fuel consumption is improving, and ethanol prices are slumping as a result.

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Sugar output in India, the second-biggest producer, could end up being hurt as yields in some areas are looking like they will shrink, Dev Gill, head of sugar & grain options at Marex Spectron in London, said by email. In the European Union, low sugar prices may trigger beet farmers to shift plantings to more profitable wheat crops.

But there’s one area of consensus among analysts and traders: crude oil will drag sugar wherever it goes, up or down. READ MORE

Brazil’s sugar mills cleared to sell ethanol directly to filling stations (Argus Media)

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