Raw Sugarcane Prices Explained

The global raw sugarcane currently experiences significant price increases due to a combination of factors that affect the supply and demand sides of the market.

Here are the top 4 reasons:

Why are raw sugarcane prices fluctuating?

1. Extreme Weather Fluctuations and Crop Damages

Unseasonal weather patterns had a significant impact on sugar cane production.

The International Sugar Organization (ISO) expected global sugarcane production to reach 1.87 billion tons in 2022/23, down from 1.91 billion tonnes in 2021/22.

This is due to increasing adverse weather conditions.

For example, in India ( the world’s top 2 sugar producers ) unseasonal rainfall damages the sugarcane crops. Similarly, in the Philippines, weather disturbances and low fertilizer application due to soaring fertilizer prices drastically affected sugarcane production.

Additionally, the La Niña weather pattern which causes a drier season puts up the declining output in Brazil.

Overall, these weather-related disruptions led to a decrease in supply and the spiking of raw sugarcane prices.

2. Increased Global Demand

Major sugar-consuming markets such as India, EU-27, China, USA, Brazil, Indonesia, Russia, Pakistan, Mexico, and Egypt recently grew their demand for sugar.

Thus, this rising demand from its top consumers overshadowed the reduced supply and contributed to the surge in raw sugarcane prices.

3. Reduction in Exports

The unprecedented weather conditions that battled India’s agricultural assets, including sugarcane plantations forced the country to stop its sugar exports in October 2023.

This includes raw sugar, white sugar, refined sugar, and organic sugar imports. The purpose of this initiative is to cool off its soaring domestic sugar prices.

Overall, this limitation will touch raw sugarcane price benchmarks as the Indian government imposed an indefinite sugar export restriction.

4. Ethanol Production

Apart from corn and sugar beets, sugarcane plays an important role in biogas production.

Economists predicted that there will be an intensified need for sugarcane production in the coming years as governments around the world look to reduce their reliance on fossil fuels.

Thus, this increased ethanol production supports the raw sugarcane prices.

Which variables impact the price of raw sugarcane?

• Extreme Weather Fluctuations and Crop Damages
• Increased Global Demand
• Reduction in Exports
• Ethanol Production
• Production Output and Demand

Where does raw sugarcane come from?

Sugarcane is a tropical grass grown in many parts of the world. It is the primary source of sugar and is used to produce ethanol.

These are the planting and harvesting process of sugarcane:

Planting

1. Land preparation: The first step is to prepare the land for planting. This involves clearing the land of weeds. Then, plow the soil to create a smooth seedbed.

2. Planting: Sugarcane is planted using cuttings from mature stalks. The cuttings are typically about 2 feet long and have at least two buds. These are planted in furrows that are about 6 inches deep and 3 feet apart.

3. Irrigation: Irrigation is especially important during the early stages of growth as sugarcane requires a lot of water, so it is important to irrigate the field regularly.

4. Fertilization: Sugarcane requires a lot of nutrients. Generally, sugarcane farmers apply nitrogen, phosphorus, and potassium fertilizers.

Harvesting

5. Ripening: Generally, sugarcane takes about 12 months to mature. The stalks are ready for harvest when they are yellow and the leaves have fallen off.

6. Cutting: Sugarcane is typically harvested using a machine that cuts the stalks at the base. The stalks are bundled and transported to a mill.

7. Milling: The sugarcane is milled to extract the juice. The juice is processed to produce sugar, ethanol, and other products.

Products Made from Sugarcane

1. Sugar: The most common product made from sugarcane. It is extracted from the juice of the sugarcane stalks. Sugar is used in a wide variety of foods and beverages.

2. Ethanol: Ethanol is a biofuel produced from sugarcane. It can be blended with gasoline to reduce emissions and improve fuel efficiency. Additionally, it is also used in some industrial applications such as agriculture operations.

3. Molasses: Molasses is a thick and sweet syrup. It is left over after sugar has been extracted from sugarcane juice.

4. Bagasse: Like molasses, bagasse is a fibrous residue that is left after the sugarcane juice extraction. It is used as a fuel for sugarcane mills. Moreover, it is used to produce paper, plywood, and other products.

5. Filter mud: Filter mud is a byproduct of the sugar refining process. It is a nutrient-rich fertilizer useful to improve soil quality.

Here are other products made from sugarcane:

Rum: Rum is a distilled alcoholic beverage made from sugarcane molasses.
Cachaça: Another distilled alcoholic beverage made from sugarcane juice.
Sugarcane vinegar: Sugarcane vinegar is a type of vinegar that comes from sugarcane juice. It is used in various dishes such as salads, marinades, and dressings.

Nowadays, this flexible commodity comes from Brazil, India, China, Pakistan, and Thailand.

What is the future price of raw sugarcane?

Raw sugarcane prices showed volatility in the past years and its value will continue to rise in the long term due to the increasing demand and limited supply.

These are the present and future raw sugarcane price determiners:

Increasing use in ethanol production: The importance of sugarcane as biogas feedstock makes this commodity even more marketable. The increasing demand for renewable energy drives the demand for ethanol, which in turn creates a spike in raw sugarcane.

Building materials: Raw sugarcane is also used to produce other products such as paper and plywood. The growing population means more opportunities for housing projects.

Overall, these factors largely contribute to the bullish raw sugarcane market at $480 per ton by 2030.