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Sugar hits two-year low as Brazil output revives

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A revival in sugar futures from a two-year low stalled after data showed that production in Brazil's key Centre South region had pulled ahead of last year's for the first time, boosted by "favourable" weather.

Sugar output from the Centre South, responsible for nearly 90% of Brazilian production of the sweetener, reached 2.55m tonnes in the last half of October, up 73% on the same period last year.

The jump, which reflected clear weather for cane harvesting and a decision by more mills to remain open this late into the year, took the total sugar produced so far in the April-to-March season to 29.34m tonnes – 30,000 tonnes ahead of that a year before.

The, narrow, advantage represented the first time this season that cumulative sugar output in Brazil this season, where early progress was slowed by heavy rains, has overtaken that of 2011-12, and gave credence to revived hopes for production.

Price reaction

In New York, March raw sugar futures - which had been recovering from a two-year low for a spot lot of 18.69 cents a pound, depressed by fears for the Unica data - turned down again after the data was released.

However, Unica offered sugar bulls some hope in saying that the return of rains this month meant a slowdown in the pace of harvesting, and a drop in the level of sucrose in cane.

"With the return of rain is expected a fall in the level of [recoverable sugars in cane] and greater difficulty for sugar production,", Antonio de Padua Rodrigues, the Unica interim president, said.

The March contract stood at 18.87 cents a pound, a drop of 0.4%, in late deals.

Extended operations

Mr Rodrigues said that only 19 mills Centre South had closed as of late October, compared with 97 a year before, as sugar groups exploited the improved harvest conditions.

Groups including Noble have pledged to run their mills into December – rainy season allowing – to catch up on crushing.

Nonetheless, despite the improved output, Mr Rodrigues downplayed ideas of Unica revising upward its output forecasts, saying that the pace of cane harvesting was still "in line with" the group's estimate of a 518.5m-tonne crush.

The crush so far has reached 455.56m tonnes, still slightly behind the 460.16m tonnes a year ago.

By Agrimoney.com

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