Noble Group cautioned over the disincentive that low sugar prices were offered to production as the commodities trader unveiled a 68% drop in earnings, blamed on losses in its agriculture division.
The coal-to-cotton group said that its Brazilian sugar mills were "performing at, or above, industry standards of efficiency", leaving them on track to meet a 2013 crush target of 13.6m tonnes of cane despite rain delays during the early part of the harvest season.
Singapore-based Noble - with Olam International and Wilmar International one of the 'Now' group of major Asian agricultural traders - said that it had shifted its production mix too to account for the greater returns from turning cane into ethanol than sugar at current prices, with output of the biofuel more than doubling so far.
The sugar operations are expected to product 509,000 cubic metres of ethanol this year, an increase of 59%, with sugar output seen rising 21% to 1.02m tonnes.
Noble also flagged a boost to the sugar business from the weakness against the dollar of the Brazilian real which on Wednesday hit R$2.3159 against the dollar, its weakest in four years, terming the decline "structurally positive" for Brazil's sugar industry.
A weak real boosts the competitiveness of Brazilian exports and underpins the value, in real terms, of dollar-denominated assets.
However, "sugar prices will need to trade above the levels seen recently in order to sustain attractive returns.
"Even low-cost Brazilian producers would likely see marginal returns if US dollar sugar prices persist at current levels."
Raw sugar futures last month hit a three-year low of 15.93 cents a pound in New York, although they have since recovered to close on Wednesday at 16.79 cents a pound.
Even so, that is well below the 2011 high of 36.08 cents a pound.
The comments came as Noble unveiled a drop to $62.8m in earnings for the April-to-June quarter, down from $194.8m a year earlier, on revenues up 1.8% at $47.9bn.
Operating in profits in energy rose by 12% at $351.3m, and in minerals and ores by 86% at to $55.5m.
However, the group's agriculture division, which includes the sugar business, fell into a second successive quarter of operating losses, this time of $53.7m, compared with a $51.1m profit a year before.
"The agricultural business currently remains a substantial drag on group earnings," Yusuf Alireza, the Noble chief executive, said.
The group flagged improvements at its crushing operations in Argentina and China.
However, divisional profitability "continued to be impaired by disruptions in the grains and oilseeds origination business", with setbacks including Brazil's notorious logistical hiccups.
"The Ukraine has also proven to be a challenging market," Noble said.