Cutbacks in the world's largest sugar producer could end a multi-year supply glut, sending prices higher next year, according to traders.
Brazilian producers, who accounted for over 40 percent of sugar exports last season according to the U.S. State Department of Agriculture, are closing mills and reducing sugarcane investments following four straight seasons of excess production, sparking bullish calls on the sweetener.
"We reiterate our view that production shortfalls could cause consumption to exceed production in the coming season, leading to a drawdown in inventories built up over the past four years," Abah Ofon, agricultural commodities research at Standard Chartered told CNBC on Monday.
To boot, sugarcane industry group Unica slashed its 2014-15 output forecast in the country's Centre South region, which accounts for nearly 90 percent of domestic production, by 1.1 million tons as a result of a drought earlier this year.
Calls for a recovery in sugar prices come even as the overall market mood remains bearish. On Monday, prices fell to a fresh seven-month low of 14.93 cents, well below the 100 day moving average of 17.38. Over the past two weeks, sugar has fallen over 2 percent and is down nearly 9 percent year to date.