Brazil's sugar production, and exports, will not for at least
another two years challenge their record highs set two seasons ago, the
International Sugar Organization believes – although ethanol output may jump.
The intergovernmental group - expanding on a forecast made
last month that Brazilian sugar production will fall by 500,000 tonnes to 37.0m
tonnes in 2014-15 - pegged shipments from the top exporting country at 25.5m
That would represent a 1.1m-tonne decline on exports last
season, which ended in March, and represent a three-year low.
Brazil's sugar production will see a small recovery in next
year to 38.0m tonnes, enough to support exports of 26.5m tonnes, although these
figure remain short of record highs set in 2012-13.
"Stagnation" in sugar output in the top producing country "may
last at least until the 2015-16 season", the organisation said.
The data reflect ISO thinking that Brazil's sugar output
will be curtailed by the impact of poor finances on its cane processing
industry, much of which attracted investment on the basis of prices higher than
the 16.78 cents a pound at which New York spot futures stood on Friday.
Marex Spectron, the London broker, estimates the cost of production
at about 20 cents a pound.
"The number of mills in operation in Brazil is shrinking,
the tools available for the government to help the industry are less evident,
and many of the large milling groups are reporting higher debt," the ISO said
Sergey Gudoshnikov, ISO senior economist, said on Friday that
"each year, Brazil is losing 5-10 mills".
Fixed costs spread
However, the closures are at least improving prospects for remaining
mills, in allowing them to raise their throughput and spread their costs over a
"Brazil is processing more and more cane with less and less
mills," Mr Gudoshnikov told Agrimoney.com.
The ISO also sees mills downplaying sugar and turning more
cane into ethanol in 2015-16, producing a record 29.8bn litres, after keeping
output flat at 27.5bn litres this season.
"However, these estimates are something of a moving target,"
Mr Gudoshnikov said.
"They are based on a number of assumptions, which could
Sugar vs ethanol
In fact, market values have moved against production of the
biofuel short-term, with prices of anhydrous ethanol, on a sugar equivalent
basis, falling from 18.39 cents a pound in April to average 16.61 cents a pound
last month, the ISO said.
"Domestic crystal sugar prices were flat at 19.60 cents a
The observation tallies that earlier this week of Cepea, which
said that "crystal sugar remunerated 27% more than anhydrous ethanol in late
May" in Sao Paulo, the top cane growing state.
Against hydrous ethanol, that used neat rather than mixed
with gasoline, "the sugar advantage was 35%", said the research institute,
which is linked to Sao Paulo University.
Cepea also said that the domestic sales were proving more lucrative
than exports, with sugar going for R$51.28 ($22.97) per 50 kilogramme bag in
Brazil's spot market, compared with the equivalent of R445.26 ($20.27 dollars)
for delivery against ICE futures, including costs.