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Sugar prices revive as Brazil output tumbles

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 day.

Rain delays

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 November 2011.

"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.

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