Linked In
News In
Linked In

You are viewing 1 of your 2 complimentary articles.

Register now to receive full access.

Already registered?

Login | Join us now

Sugar price gains on weak Brazil output forecast

Twitter Linkedin

Sugar futures extended gains after cane industry group Unica forecast a 1.8m-tonne decline in Brazilian Centre South output of the sweetener, adding to production headwinds a preference by mills for ethanol.

Unica, in its first full forecast for the newly started 2014-15, forecast a cane harvest in the Centre South - which is responsible for some 90% of Brazilian production - of 580.0m tonnes, within the range of private estimates.

Cane area will rise 5% year on year, although this increase reflects mainly carryover, or bisada, cane which went unharvested last year thanks to a spell of wet weather, rather than extra plantings.

However, the cane yield will fall some 8% to 79.8 tonnes per hectare thanks to the drought which hit much of central Brazil in December.

"In early December, the appearance of the sugar cane crop was very good, but the intense drought occurred precisely during the period of greatest development of the cane," said Antonio de Padua Rodrigues, the Unica technical director.

Sugar vs ethanol

The result will be a harvest short of last season's 596.9m tonnes.

And, as a further dent to sugar production, more of the cane will be processed into ethanol, which will account for 56.44% of the crop, up 1.66 points year on year, at the expense of output of the sweetener.

Centre South sugar production will drop 1.8m tonnes to 32.5m tonnes, falling for the second time in four seasons, and to a figure below that some other commentators have factored in.

US Department of Agriculture staff in Sao Paulo last week pegged the region's sugar output at 33.55m tonnes, a drop of some 1m tonnes year on year.

Sugar for July, which was standing higher heading into the report, extended gains to 2.2% for July delivery, taking the contract to 18.01 cents a pound.

'Favourable recipe for ethanol'

The Unica data factor in a calculation that sugar prices, even while well above levels below 15 cents a pound reached in late January in New York's futures market, are yet to make it worthwhile for mills to switch from ethanol.

"Current revenue from the sale of sugar is lower than that provided by ethanol," Unica said.

Mr Rodrigues said: "Future sugar prices in the international market and the domestic ethanol market indicate a favourable recipe for the biofuel currently."

Cepea sums

This analysis contrasts with calculations from other observers, with research institute Cepea on Tuesday saying that crystal sugar offered mills 11% more than anhydrous ethanol, as mixed into gasoline, and 24% more than hydrous ethanol.

However, Cepea concurred with Unica that the sugar market is relatively well supplied.

"Although the supply of the new crop is not abundant, mills that still have remaining batches from the previous crop [have] had to reduce sales prices," Cepea said.

"Wholesalers and traders are also selling sugar batches at lower values, which prompted some mills to reduce quotes."

'Worrying trend'

Unica also highlighted the poor finances of the industry, a factor in a relatively small rate of cane replantings which should lead to an ageing crop profile in 2015-16, "with a negative impact" on next season's crop.

Continuing a "worrying" trend, "at least 10" mills have closed for 2014-15, compared with one plant starting up.

"The picture is stark - in addition to the 10 plants closing, there are over 30 mills in bankruptcy protection" or in some other state of "fragile financial condition", Mr Rodrigues said.


Twitter Linkedin
Related Stories

Weekly grain, oilseeds market view from Europe

What does Vivergo ethanol plant shutdown mean for UK wheat?... Eu wheat export prospects... EU rapeseed imports...

Evening markets: export data hold sway in ag markets - helping cotton

... but not corn and soybean futures. Wheat futures fare a bit better, despite talk of Russia strengthening its grip on world trade

Morning markets: Wheat futures recover. But key tests for revival await...

Wheat futures shy away from contract lows. But a series of export market tests await. Palm oil looks for its first gains in six sessions

Evening markets: wheat plunges close to contract low, while US data lift soyoil

Wheat futures make attempt to follow corn in setting a contract low. But soy prices get a boost from US crush data
Home | About | RSS | Commodities | Companies | Markets | Legal disclaimer | Privacy policy | Contact

© 2017 and Agrimoney are trademarks of Agrimoney Ltd
Agrimoney is part of the Briefing Media group
Agrimoney Ltd is registered in England & Wales. Registered number: 09239069