Unica cuts Brazil cane, sugar output hopes

Cane industry group Unica cut its forecast for output in Brazil's key Centre South region despite an acceleration in the harvest this month, driving processing volumes, and sugar output, to the highest of the season.

Unica cut to 546m tonnes its forecast for cane production in 2014-15 in Brazil's Centre South, responsible for some 90% of domestic output, below a previous forecast of a 580m-tonne harvest, and representing a fall of more than 50m tonnes from last season's result.

The forecast for Centre South sugar output was cut by 1.15m tonnes to 31.35m tonnes, down from 34.29m tonnes last season.

The downgrade reflected the damage from drought this year in much of the Centre South, where the Piracicaba region of Sao Paulo state, the biggest cane grower, between April and July received only 32% of average rainfall.

"Traditional sugarcane areas have been severely affected by drought," said Antonio de Padua Rodrigues, the Unica technical director.

Season's peak?

The downgrade came, ironically, as Unica unveiled the best period so far this season (starting in April) for cane harvesting, with 44.90m tonnes crushed in the first half of August - up 25% on volumes in the second half of July when, unusually, rains did delay operations.

Centre South mills have not crushed 325.3m tonnes of cane so far in 2014-15, up 2.8% year on year.

Sugar production, at 2.80m tonnes in the latest period, was also up 25% from that in the second half of July, and at its highest for any half-month spell so far this season.

'Should see early closure'

However, with the drought-hit cane coming off at lower yields, expected in Sao Paulo state to fall 15% year on year, Unica underlined its expectations of a premature end to harvest as mills run out of crop despite expectations that mills may cut cane aged less than 12 months to boost volumes.

Typically, cane is not harvested until it is some 18 months old.

"Over the next few months, the sector should see the early closure of grinding by several mills in the Centre South region," Mr Rodrigues said.

In Sao Paulo, mills are seen ending processing "around 30 days" earlier than normal.

"Two mills should have shut down the harvest by the end of August," Unica said.

Sugar vs ethanol

Sugar output will be further depressed by a switch by mills towards turning more cane into ethanol rather than the sweetener.

"The fall in the price of sugar, and the better remuneration provided by the turning to ethanol, have encouraged this reversal," Mr Rodriguez said.

Unica forecasts 44.5% of Centre South cane being turned into sugar in 2014-15, below the 45.2% last season.

On the markets, the impact of Unica downgrade was offset in part by a downbeat forecast from the International Sugar Organization on sugar prices.

Furthermore, Unica had earlier this month signalled the potential for a drop of 40m-50m tonnes in Centre South cane volumes this year, and of a drop of 2m-2.5m tonnes in sugar output.

Nonetheless, raw sugar futures for October extended head to stand at an intraday high of 15.59 cents a pound an hour after the data were release, a gain of 1.5%.

Sugar price recovery 'unlikely', says ISO
Agricultural Commodities
Agricultural Markets
Agricultural Companies
Agricultural Events