Sugar prices recouped losses after data showed a sharp
slowdown in output in Brazil's key Centre South district, as rains delayed cane
harvesting and mills processed most of what was cut into ethanol.
Sugar output in the Centre South - responsible for some 90%
of volumes in Brazil, the top producing country – fell to 1.44m tonnes in the
second half of November, cane industry group Unica said.
While some decline had been expected in what is the end of
the cane crushing season, the extent of the fall – down one-third on production
in the first half of last month, and a drop of 22% year on year - surprised investors.
Raw sugar futures for March 2014 delivery recovered from losses
of 0.4% before the data to reach 16.66 cents a pound, a gain of 0.7% on the
The fall in production reflected in part a drop in cane
processing, with volumes falling by 24% from the first half of November as wet
weather interrupted harvesting.
"The fall in the grind observed in the second half of
November is due to rain that hindered the harvest in some regions," Antonio de
Padua Rodrigues, the Unica technical director, said.
He also highlighted the spread of seasonal closures among
mills, with the total shut for the rainy season rising to 75 by the end of last
month, albeit a figure below the 94 a year before and 246 at the end of
"As we anticipated, the cane harvest is expected to finish
later for most companies this year," Mr Rodrigues added.
Sugar vs ethanol
Mills also turned a far smaller proportion of cane into
sugar than usual, at 44.1%, favouring ethanol manufacture instead.
"It is natural that there is a reduction in sugar production
at the end of the harvest, but this year the fall was higher than expected for
the fortnight," Mr Rodrigues said.
He attributed the dynamic to expectations of a softer
domestic sugar market, and the growing appeal of the Brazilian ethanol market.