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Dry weather fosters jump in Brazil sugar output

Sugar production in Brazil's key Centre South region revived sharply, thanks to a recovery in the cane harvest and a slight recovery in the proportion of the crop turned into sweeteners rather than ethanol.

Mills in the Centre South, responsible for some 90% of Brazil's sugar output, produced 2.40m tonnes of sugar in the first half of the month, up 60% from the level in the preceding fortnight when rains disrupted the cane harvest, data from industry group Unica said.

Indeed, it represents the best period for sugar output so far in 2013-14, which started in April.

The increase reflected in the main a jump in the volume of cane crushing, enabled by the drier weather, with the processing rate, at 42.7m tonnes, also setting a season high.

However, mills raised too a little the proportion of cane turned into the sweetener, rather than ethanol, to 45.4%, from 42.4% in the last half of June.

Ethanol appeal

The return to sugar came despite growth in sales of ethanol which - for the hydrous type used neat in fuelling cars rather than being mixed with gasoline reached "surprising" levels in the first half of July, Unica said.

In the latest week, hydrous ethanol was less than 65% of the price of gasoline in Goias and Sao Paulo states, below the level at which it becomes more attractive economically for drivers of so-called "flex-fuel" vehicles to fill up with the biofuel rather than gasoline.

"In some cities, this ratio was below 60%," Unica said.

Centre South ethanol sales so far in 2013-14 have reached 9.39bn litres, a rise of 46% year on year, compared with a 21% rise to 11.3m tonnes in sugar output.

Market reaction

The impact on sugar futures was to extend losses, with the benchmark October futures contract 1.0% lower at 16.17 cents a pound in late deals.

Unica made no mention of the degree to which rains early this month have slowed up cane harvesting, and the potential impact on sugar production.

Sugar prices had already traded weaker after Brazilian frosts overnight were reported as unlikely to have caused much damage to cane crops, besides to coffee plantations.

Arabica coffee for September slumped 3.8% to 121.35 cents a pound.

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