Sao Martinho, one of Brazil’s largest cane growers and processors, forecast sugar production to rise 10% this season, thanks to better weather and a higher volume of cane harvested, even as a global deficit supports prices.
The company forecast its 2016-17 cane crushing up 3.8% to 20.55m tonnes, following on from a 7.0% rise in 2015-16.
And the proportion of sugar available in cane was seen rising, allowing sugar production to rise by 10.0% to 1.36m tonnes in 2016-17.
The expected rise in production is in line with that forecast across Brazil’s Centre South cane belt.
Focus on sugar
The sugar to ethanol ratio is expected to remain pretty steady with last year, at about 1:1.
Across the cane belt as a whole, more cane is expected to be diverted to sugar.
Sao Martinho noted that according to the cane industry body Unica “production growth in the region should be more concentrated in sugar, due to higher international prices compared to the previous crop year”.
Still, despite the rising Brazilian output, production is expected to fall globally after drought in key parts of Asia.
“Already considering this scenario of higher sugar production in Brazil, the global scenario points to a sugar deficit of approximately 6.1m tonnes, reinforcing the positive scenario for international sugar prices in the short and medium term,” said Sao Martinho.
Sao Martinho’s forecast for the global deficit was in line with one issued by Brazilian analyst group Datagro last month.
The analyst Platts Kingsman last month forecast the 2016-17 global deficit at 7.3m tonnes, while the International sugar organisation has it at just 3.8m tonnes.
Rising revenues, sales
In the three months to March 31, Sao Martinho saw revenues of R$818.1m, up 13.9% from the same time last year.
In the fourth quarter of the 2015/16 crop year (4Q16), the Company’s net revenue amounted to
“The increase mainly reflects the growth in sugar and anhydrous ethanol sales volume and the higher prices for both products compared to the year-ago period,” said Sao Martinho.
The company’s net income rose by 21.9%, to R$68.9m over the same period.
But BTG Pactual warned that “quarterly results are seldom meaningful for ag companies as they normally tell very little about future performance”.
“In the case of sugar and ethanol, fiscal fourth quarter results are normally a function of sale of available inventories of sugar and ethanol,” BTG said.
The bank also noted that the scale of hedging would prevent Sao Martinho from benefitting fully from rising prices.
The company has hedged 69% of its sugar production, or 767,067 tonnes, at an average price of 14.42 cents a pound, with front-month sugar futures in New York trading over 19 cents a pound.
Sao Martinho shares were down 1.0% in morning deals in Brazil, at R$52.55.
Still, BTG maintained a buy rating on Sao Martinho, citing the coming sugar deficit.
(Source – http://www.agrimoney.com/news/sao-martinhos-sugar-output-to-soar–9624.html)