Sugar soars as crops in world's top producer Brazil hit by frosts

SAO PAULO/NEW YORK (Reuters) - Sugar prices hit their highest level in more than four years on Tuesday after a report confirmed damage to sugarcane crops in the world’s larger producer Brazil from unusually harsh frosts in June and July.

Sugar production in Brazil’s centre-south region fell by 11% in the second half of July to 3 million tonnes, industry group Unica said, more than expected. Unica added that the three waves of frosts that hit the agricultural areas had further damaged crops already hurt by the worst drought in 90 years.

Market participants were already expecting lower numbers for the second half of July due to the frosts, but the Unica figures were below estimates. Sugar futures on New York’s ICE exchange, rose nearly 7% on Tuesday in response.

Unica said sugarcane produced per hectare fell 17.9% in July when compared to the year-earlier period, as the frosts meant mills had to cut cane before the ideal harvesting time.

Cane crush fell 8% from the same period a year ago, to 46.69 million tonnes.

“Both agricultural yields and the quality of the cane have been hurt by the frosts,” Unica’s technical director Antonio de Padua Rodrigues said.

The sugar season in Brazil, a country that supplies around 40% of the global sugar trade, could end much earlier than usual, causing tighter global supplies.

Rodrigues said that in coming weeks the industry will have more data about the impact of the frosts on production.

A survey by information services company S&P Global Platts estimated sugar output would fall 10%.

“The third frost event for the 2021-22 harvest in the center-south region which occurred during the second half of July added additional stress on proper cane growth,” S&P Global Platts said.

Some analysts see sugar prices rising further in coming weeks as a result of the short-term production outlook.

The drought and the frosts in Brazil hurt several other crops, including corn and coffee.