Sugar producers squeezed by higher prices for diesel and fertilizer

The cost of producing sugar has increased in Brazil and other major producers, according to the Datagro chief analyst.

Plinio Nastari stated that the Brazilian sugar production cost is equivalent to a price per pound of 18.63 cents, which has increased by around two cents in a year. The raw sugar price in New York was around 15.30 cents a pound on Tuesday. This means that no sugar producer is currently making money.

Due to the Middle East situation, diesel and fertilizer prices are on the rise. Datagro reports that Australia is the second most competitive sugar producer in the world, after Brazil, at 20.02cents per pound. Guatemala comes in at a close second at?20.25 cents, and Thailand, a major exporter at 21.33cents.

Nastari stated during a presentation to the Citi ISO Datagro sugar & ethanol conference in New York, that this will result in a fall in beet plantings in the Northern Hemisphere as well as sugarcane in tropical regions such as?Thailand as farmers switch over to other crops.

Datagro predicts that the beet areas in the European Union will fall between 8 and 12 percent in the "new season" which begins in October. The consultancy predicts a?8% drop in sugar production for the bloc. The consultancy predicts that Thai sugar production will fall from 12 million tonnes in the previous season to 10,3 million tons by 2026/27.

"We are concerned that some cane areas in Thailand will be lost due to the low prices," said Jeremy Austin director of sugar trader Sucden.

He said that the?Thailand region could drop between?5% to 6% with farmers switching over to?cassava.

Nastari said that "Fertilizers, and especially nitrogen fertilizers will remain high after the war until there is normalization in supply."

(source: Reuters)