Sugar futures pared losses after industry data showed the
cane harvest in Brazil's main growing region slowing, keeping sugar output
behind that last year.
Raw sugar for July, which had been trading down 0.7%,
recovered to post a 0.6% gain, retaking the 17.00 cents-a-pound mark, after Unica
said that mills in Brazil's Centre South crushed less cane in the second half
of May than in the first.
At 37.98m tonnes, mills in the region, responsible for some
90% of Brazil's cane and sugar output, processed 2.4% less crop than in the first
half of last month.
While sugar output showed a 6.2% increase, as mills switched
more production to the sweetener rather than ethanol, the cumulative total for
2014-15 so far remains below that last year.
Centre South mills have produced 5.44m tonnes so far in the season,
which started in April, down 3.6% year on year.
And there are concerns that production will continue to lag,
with Unica cautioning over a drop in cane yields, and the prospect of this
However, the rally in futures waned as focus returned to the
heavy stocks of the sweetener left over from a successions of years of world
"While the lower production should be seen as bullish, the
current burdensome supply and lethargic current demand are keeping the upside
in check," Sterling Smith at Citigroup said.
"The large supplies and current sluggish demand is keeping
July raw sugar futures stood at 16.98 cents a pound in late
deals, unchanged on the day.
In London, white sugar futures for August were 0.3% higher
at $461.20 a tonne, below a day high of $465.30 a tonne, when the contract was
bumping up against its 10-day and 100-day moving averages.
Unica attributed the pullback in cane processing volumes in
part to lower crop yields, "mainly due to the drought in the early months of
the year" in the Centre South.
Yields so far in 2014-15 have averaged 77.3 tonnes per
hectare, down 8.8% year on year.
"In some places the Mid-South this fall in yield was even
more pronounced," said Antonio de Padua Rodrigues, the Unica technical director.
Some mills were forced "to reduce the rate of grinding to
prevent the advance of harvest over areas of younger cane", less than 12 months
The expectation is that this yield shortfall will "persist",
and may grow, "especially for cane available for harvest in the last third of
the season", Mr Rodriguez added.
Some other commentators have also forecast a decline in cane
yields ahead, with London broker Marex Spectron foreseeing that "the cane of
which growth was stunted by the drought would only begin to show lower agricultural yields from mid-June