The debate over prospects for sugar output from Brazil’s key Centre South region swung towards a rise in output this season as Louis Dreyfus backed ideas of a crop of at least 33.5m tonnes, although rain concerns kept a prop under futures.
Brazil’s Centre South, responsible for about 90% of domestic sugar output, will produce 33.5m-34m tonnes of the sweetener in 2015-16, which started this month, Louis Dreyfus Commodities sugar analyst Benoit Boisleux.
The figure represents an increase from the 32.0m tonnes of sugar produced last season, and comes the day after Brazil’s official Conab crop bureau, in its first forecast for the new season, pegged output at 33.72m tonnes.
Indeed, a trend may be emerging of rising expectations for 2015-16, with Green Pool two weeks ago raising its forecast for Centre South sugar output by 1.1m tonnes to 32.5m tonnes, on a tel quel basis.
Meanwhile, Conab, Brazil’s biggest cane crusher, has said that, contrary to broader market expectations, it will lift sugar output rather than ethanol production this season.
‘Forex favour sugar’
The improved expectations for sugar output reflect in part currency factors, with the weakness of the real improving the returns from selling sugar, even at prices which, in dollar terms, are amongst their lowest in six years.
Brazil exports far more of its sugar than its ethanol, which is consumed in the domestic market.
“The exchange rate favours closing of export contracts for sugar, Cid Caldas, the Brazilian agriculture ministry director, said on Monday.
However, dollar sales also provide debt reassurance for Brazil’s highly-geared cane mills.
“For mills with dollar -denominated debt, producing sugar remains attractive as a natural hedge against currency risk,” the International Sugar Organization said.
The Conab sugar production forecast reflected a forecast of a 592.7m-tonne cane crop in the Centre South, up 3.0% year on year, although remaining a little below the 2013-14 high of 597.1m tonnes.
Yields were forecast rising 2.5% from last season’s dryness-reduced levels, with area up 0.5% at 8.02m hectares.
The forecast also factored in an expectation of 137.8 kilogrammes in output of sugars, per tonne of cane.
Last season, the figure was some 136.6 kilogrammes per tonne, according to cane industry group Unica.
Conab also sees 43.2% of cane going to make sugar, with the balance used for making ethanol, compared with a figure of about 43.0% for last season on Unica data.
Sugar futures extended gains on Tuesday despite, standing up 0.9% at 13.13 cents a pound in morning deals in New York, despite the improving sugar output forecasts.
Shorter term, rains have raised fears for disruption to cane harvesting, and of a potential dilution in cane sugar content.
“Weather in Brazil’s Centre South areas has been rainy and expected to continue so, hampering the start of the harvest,” said Nick Penney, senior trader at Sucden Financial.
The rainy weather may also “encourage the sucrose to be used for fuel rather than crystallised into sugar”, he added.
(Source – http://www.blackseagrain.net/novosti/dreyfus-backs-idea-of-rising-brazilian-sugar-output)