Sugar prices nudged higher after industry data showed that the recovery in cane harvesting in Brazil's key Centre South region stalled, as mills took capacity off-line for routine repairs.

The dry weather which has allowed a sharp revival in Centre South cane harvesting and sugar output since July remained in place in the first half of this month, cane industry group Unica said.

However, the volume of cane processed fell by nearly 10%, to 42.0m tonnes.

"The lower grinding is due to maintenance shutdowns held by mills in this period," Antonio de Padua Rodrigues, the Unica president, said.

Sugar production

Output of sugar showed more resilience, thanks in part to mills directing more cane than earlier in the season to making sugar, rather than ethanol.

Furthermore, the level of sucrose in cane showed a continued recovery from rain-affected levels at the start of the season.

Mills produced 3.14m tonnes of sugar in the first half of September, compared with 3.34m tonnes in the last half of August, which includes an extra day.

Output was higher year on year, with mills in the Centre South, responsible for nearly 90% of Brazilian sugar volumes, producing 2.8m tonnes of sugar in the first half of September 2011.

'Slightly nervous'

Nonetheless, New York raw sugar futures, which had erased nearly all gains before the data emerged, rebounded to close at 19.86 cents a pound, a gain of 1.8% on the day.

Centre South mills are believed to have suffered further production slowdowns later in September, thanks to rains rather than maintenance checks.

At Sucden Financial, Nick Penney suggested that speculators which have taken out short positions of late may "have got slightly nervous at the prospect of rain in Centre South Brazil cane areas".

Indeed, the precipitation has stoked concerns that mills will have insufficient time left to harvest all their cane before the rainy season begins in earnest, potentially next month.

Many mills, including some owned by Bunge and Noble Group, are banking on an extended dry spell to make up for the rain-delayed start to the cane harvest get all their crop crushed.

Luis Roberto Pogetti, president of Centre South co-operative giant  Copersucar, said: "If it rains, as is forecast, at the end of October, November and December, I believe that some 20m tonnes of cane will be left over" for harvest in 2013.

'Crush could be cut short'

Fears for Brazilian rains are especially acute given the potential for an El Nino, which typically brings early and plentiful seasonal precipitation to many cane-growing areas.

Consultancy Kingsman earlier this month, forecasting a Centre South cane crush estimate of 512m tonnes, cautioned that the figure could be cut to 500m tonnes if rains do start early.

Sugar output could be limited to 30m tones, rather than a central forecast of 31.7m tonnes.

"The crush could be cut short," and levels of sugars in cane "could suffer", Kingsman said.