NEW YORK, Sept 9 (Reuters) -Benchmark raw sugar prices in New York SBc1 are expected to stay firm and possibly go higher than current levels due to a tight global balance of the sweetener, Bank of America Global Research said in a note on Monday.
Analysts at the bank said cane crushing in Brazil, the world's largest sugar producer and exporter, has been below expectations "given dry weather and the recent wildfires in Sao Paulo state."
"There is also a risk to cane crushing volumes in Brazil in 2025/26 given a potentially drier inter-harvest period and yield impacts from the wildfires, especially in (cane) renewal areas," the bank said, adding that it sees most projections for the Brazilian crop as "overestimated".
BofA projects the global sugar balance at a small surplus of 650,000 metric tons, leading to a stocks-to-use ratio of 54.1%. It said those fundamentals should drive prices to around 21-22 cents per pound.
Sugar prices on ICE closed at 18.83 cents per pound on Monday, a two-week low.
The bank said that if India goes ahead with plans to divert 3 or 4 million tons of sugar to ethanol production, the global supply balance would shift to a deficit of around 3 million tons.
BofA also expects ethanol prices to rise in the Brazilian market with the smaller cane crop. With those fundamentals, the bank has a buy recommendation for sugar and ethanol companies Adecoagro AGRO.N, Raizen RAIZ4.SA and Sao Martinho SMTO3.SA.
