RSS
Twitter
Linked In
News In
News
Linked In
RSS
https://twitter.com/Agrimoney
http://www.newsnow.co.uk/h/Industry+Sectors/Agriculture

You are viewing 1 of your 2 complimentary articles.

Register now to receive full access.

Already registered?

Login | Join us now

Sugar prices may recover - in 2016-17, Sao Martinho says

Twitter Linkedin

Sugar prices may not recover this season – but there is still hope for 2016-17, said Felipe Vicchiato, head of cane crusher Sao Martinho, flagging Brazil's limited ability quickly to rebuild production.

Mr Vicchiato, the chief executive of the Sao Paulo-based group, restated the group's downbeat expectations for sugar prices short-term, saying that "there isn't a lot of room for further increases" in values in 2015-16.

After "about three to four years" of global production surplus of the sweetener, "sugar inventories all over world are very high", he said, adding that this was why the group had hedged forward so much of its production this season already.

Sao Martinho on Thursday revealed it had already sold forward, as of the end of June, the equivalent of 68% of its cane volumes for 2015-16, which ends in March next year for the company, and indeed for the Brazilian sugar industry as a whole.

'Reaction in prices'

And he flagged dynamics expected to keep longer-term pressure on prices, on the political score, saying that India, the second-ranked sugar producer after Brazil, "still gives a lot of subsidies to sugar cane growers", and that Thailand, the second biggest exporter "does the same thing".

Still, it was too soon to consider hedging 2016-17 sugar volumes, and resigning to further low prices, Mr Vicchiato said, highlighting "what happened in the last few years" in terms of the setback to the finances of Brazilian mills from weak sugar prices.

Investment in cane fields by cash-strapped mills had been "very low", he told investors.

"Therefore maybe in Brazil, next year we will see lower volumes of sugar cane and in turn there may be a reaction in prices," with weaker cane output from the top sugar producing, and exporting, country supportive to values.

Cash flow vs profit

Any effort by Brazil to ramp up its sugar output, by switching extra cane to producing more of the sweetener instead of ethanol, will feel constraint by the requirement for many mills to maintain cashflows, rather than maximise profits.

The decision by many mills currently to favour ethanol, which can be sold immediately into the domestic market, rather than sugar "is more a matter of cash requirements on the part of companies rather than an analysis of the profitability of the product", Mr Vicchiato said.

The increasing proportion of cane turned into ethanol, rather than sugar, "more related to cash flow needs".

In fact, the current price of ethanol, compared with the price of March 2016 sugar futures, and assuming an exchange rate of R$3.50 per $1, "suggests it It's much better for me to have sugar and then sell the product in March".

Sao Martinho in the April-to-June period converted 51% of its cane into sugar (with the balance processed into ethanol), compared with 47% in the same quarter a year before.

The average mill in Brazil's Centre South has so far in 2015-16 allocated only 40.7% of cane to sugar, according to data from industry group Unica.

By Agrimoney.com

Twitter Linkedin
Related Stories

Can cotton prices extend their rally?

History suggests futures will not stay long in the 70s cents a pound. So which way will they trend?

Morning markets: Hard wheat regains premium over soft, amid US dryness worries

Kansas City wheat outperforms, as Plains precipitation worries extend to a dearth of snow cover. But Kuala Lumpur palm oil hits a 16-month low

Evening markets: Ags gain, as funds begin to get that year-end festive mood

Ag prices recover, helped by the likes of more positive comment on US export competitiveness, and some more negative talk on Argentine rains

Morning markets: Grains stage a recovery. Will it last?

Corn, soybean and wheat futures start Wednesday making headway which has been difficult to come by of late. Cotton gains too
Home | About | RSS | Commodities | Companies | Markets | Legal disclaimer | Privacy policy | Contact

Our Brands: Comtell | Feedinfo | FGInsight

© Agrimoney.com 2017

Agrimoney.com 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