Drought in the first quarter 2014 in Brazil followed by continuing dry weather, and crop damage risk from El Nino-induced lowered monsoon rainfall in India, the second largest sugar producer after Brazil, are causing hedge funds to be bullish on sugar. Yields of cane crushed to make sugar in Brazil will decline to 71 metric tons per hectare this season from a previous yield of 79 tons per hectare last year because of dry weather in Brazil’s Central South region. Growers in the region overall are expected to harvest 560 million tons compared to 597 million tons last season. If Brazil raises its ethanol requirement from 25%-26%, sugar supplies will be further reduced as more production goes toward ethanol. Despite these conditions, even with record demand, global stockpiles before the 2015 sugar harvest will be a record high 45.5 million tons. Sugar production in Thailand will reach a record in the year starting in November and shipments will likely increase to a record 9 million tons in 2015 from 8 million tons in 2014.
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