Mills investing in expanding sugar production capacity ahead of 2023/24 appears to be likely, according to Valor Economico. This is catalysed by concerns among millers about uncertainties about what President Lula's administration policies for fiscal balance, monetary policy, fuel pricing policy, and fuel tax policy will look like, in addition to doubts about the direction of the foreign exchange rate. Since these factors tend to impact the ethanol market more immediately, millers feel prioritising sugar production is a safe haven before the new campaign commences in April. The commodities broker Marex recently echoed expansion in sugar production, but for a different reason. "Sugar has been needing the sugar mix in Brazil to run close to the maximum for 3 years now and will almost certainly continue for another year. That is proof that supply has been inherently tight; in other words, we need a substantial source of additional exports. [The answer is no India because] But India is not a 'cheap' producer," Marex says. "We do think that mills will install more [sugar production] capacity in the future; in fact, it is probably by far the cheapest and quickest way to create additional sugar supply, and moreover, it looks as if increasingly sugar will offer a better return than ethanol in Brazil".
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