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Sugar prices recover, despite Brazil output jump

Sugar futures pared gains after Unica qualified data showing a jump in Brazilian sugar production by attributing the rise to a temporary factor, and underlined concerns over cane condition.

Sugar output in Brazil's Centre South region, responsible for some 90% of national production, hit 2.33m tonnes in the first half of this month, up 15.0% on output in the last half of May.

The figure was also up 30% year on year, and took total Centre South sugar output so far in 2014-15, which started in April, ahead of that at the same time last season for the first time.

Cumulative production is, at 7.77m tonnes, up 4.4% year on year so far.

Futures recover

However, sugar futures for October, while initially falling to an intraday low of 18.41 cents a pound, down 1.5% on the day, recovered ground to stand at 17.69 cents a pound 45 minutes after the data were released, a drop of 0.7%.

Unica said that the early-June growth in sugar output reflected concerns among mills over the potential emergence of an El Nino weather pattern, which typically brings wet weather to the Centre South rains which can interrupt the harvest and lower sugar content.

Mills are exploiting the current dry conditions to harvest cane, and "ensure the sugar production needed to meet future commitments already made", said Antonio de Padua Rodrigues, the Unica technical director.

In fact, the dry weather, while speeding harvesting, was adding to concerns over the damage to cane from a lack of moisture since the start of the year.

"Last month, the volume of rainfall recorded in sugar cane areas was 50% below the level recorded in May 2013," Unica said.

'Crop failure so far is worrisome'

The persistent dryness had "severely" harmed plant development, Mr Rodrigues said, adding that the effects of this setback would become apparent as the harvest proceeds, and cane producers get to worse damaged crops.

The level of "crop failure observed so far is worrisome, and should be more evident at the end of the harvest", he said.

The data showed the Centre South cane harvest for the second half of June hitting 41.5m tonnes, up a relatively modest 16.3% year on year.

However, sugar output was supported by an increase to 45.4% in the proportion of cane going to make the sweetener, rather than ethanol, compared with 42.3% a year before.

The proportion of sugar per tonne of cane was also higher, by 11.5%.

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