Brazil's newly-downgraded sugar production is at risk of further estimate cuts because of continuing dry weather, analysts have warned, in reports lifting hopes for prices of the sweetener.

Sucden Financial Sugar analyst Thomas Kujawa said that the market consensus was that the most generous forecasts for Brazil's 2010-11 sugar output had past, with expectations "now being revised downwards".

"It looks liked Brazilian supplies will be tailing off quicker than we expected," he told Agrimoney.com.

At Rabobank, analyst Andy Duff said that estimates for Brazil, the top sugar producer, "could be further downgraded in the coming months", after the 400,000-tonne cut on Thursday by cane industry group Unica to its forecast for output in the key Centre South region.

Unica blamed persistent dryness which had damaged cane yields, if enhancing sugar concentrations.

'Tighter outlook' 

The comments came as Mr Duff lifted his forecasts for prices of the sweetener, which he now sees recovering from a late dip this year to an average of 17.5 cents a pound to mid-2011, noting also weather damage to other crops.

"Recent weather events have tightened our outlook for the global sugar supply and demand balance," he said.

"A small surplus means less capacity to rebuild stocks following two significant [annual] deficits, which in turn suggests prices will remain at the upper end of the 15-20 cents a pound range in the short-term."

Christmas present 

Mr Kujawa forecast Christmas time as presenting gains to bulls, as Brazilian production runs down, but before India's crop, for which expectations are increasing, comes onstream.

"It's a timing issue," he said.

"India will not get there until early next year. And even then, we will not know what India has really got until April."

He added that there was potential for enhanced volatility if funds, which have been relatively quiet in sugar of late, return.

"Should we see them return to substantial open interest, then it will probably be on the long side."

Raw sugar for October closed 3.6% higher at 19.96 cents a pound in New York, with London white sugar for October adding 1.4% at $577.30 a tonne.