Tereos hedges 80% of sugar production, sees early start to Brazil crop
Before the strong sugar price correction in New York, French sugar company Tereos hedged last year around 80% of the sweetener that it will produce in Brazil in the new crop that starts this month, according to the company’s head in the country.
“We took advantage of high prices last year,” said CEO Pierre Santoul to reporters in an earnings call when asked about the company’s hedging strategy, adding that he is not aware if others in the industry did the same.
New York raw sugar futures SB1! lost nearly 30% of their value between late November and late December, going from 27 cents per pound to 20 cents per pound.
Funds liquidated a large part of their long position as Brazil finished a record crop and signs of improvement in the crops in India and Thailand appeared.
Sugar prices were trading at around 22.80 cents/lb on Monday.
Santoul is positive about prices going forward. He said global stocks are still low, historically, and demand in the physical market remains strong.
The executive believes that the smaller Brazil crop this year has already been priced by the market.
Future price movements, he said, will be driven by Brazilian production numbers as the crop picks-up pace, as well as by any news from the Indian government related to sugar exports.
Tereos estimates that Brazil’s Centre-South region will produce around 590 million tons of sugarcane in 2024/25 from 675 million tons in the previous crop. It will start to crush this week, a bit earlier than usual as there is cane ready in the fields.
The company will increase the amount of cane it allocates to sugar production in the new season, cutting ethanol production, as the sweetener gives higher financial returns than the biofuel.
“Mills have zero profit with ethanol currently, it is basically break-even,” he said.
