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Brazil hikes sugar output hopes to record high, as Thai woes prop prices

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Brazil lifted its forecast for sugar output to a record high, lifting its cane yield estimate, and flagging the incentive for mills to produce the sweetener as Thai crop woes support prices.

 

Conab, the official Brazilian crop bureau, hiked by 4.0m tonnes to 39.34m tonnes its forecast for domestic sugar output in 2020-21, on an April to March basis,

 

The increase took the figure up 9.54m tonnes year on year, and above the existing record of 38.69m tonnes set in 2016-17.

 

The revision reflected in part an 11.4m-tonne upgrade, to 642.1m tonnes, in the country’s cane harvest this year, taking in in line with last season’s total, as yields beat previous expectations, notably in the north east, as well in the Centre South states of Minas Gerais.

 

However, Conab lifted too its forecast for the proportion of cane converted in sugar, rather than ethanol, by 3.9 points to 46.4%, an eight-year high.

 

Sugar vs ethanol

The shift to sugar was even larger than had been expected from the 34.9% level last season, the lowest figure on data going back to 2005-06.

 

However, in 2020-21, “a bet on increasing sugar production is expected” by mills, the bureau said, highlighting the dent to ethanol demand and prices from the coronavirus “crisis”, while sugar values have proved relatively firm.

 

Czarnikow on Wednesday said that Brazilian Centre South mills could earn 12.89 cents a pound from sugar, well ahead of the equivalent of 9.70 cents a pound from converting cane into hydrous ethanol instead.

 

‘Heated demand’

Sugar prices are being supported in part by “indications of heated demand in Asia in the post-pandemic period”, Conab said, with persistent talk of higher-than-expected demand from the likes of China and Pakistan.

 

However, the bureau also flagged reduced competition in exports from Thailand, the world’s second largest sugar exporter

 

“The drought plaguing Thailand… continued to cause a drop in estimates of sugar cane production for the 2020-21 season, after output reached the lowest level in a decade the previous year.”

 

The dynamics are spurring mills “to intensify sales of [sugar] in the international market,” Conab said, noting a surge to 3.477m tonnes in Brazilian sugar exports last month.

 

That was 92% higher than a year before, and took volumes within an ace of a monthly record of 3.5m tonnes.

 

Czarnikow said on Friday that Brazil’s export line-up for August stood at 3.6m tonnes, although some volumes are often carried over to the next month.

 

Dryness impact

Conab said that Minas Gerais crops had been helped by strong rains in March, ahead of the onset of drier conditions.

 

The drier weather was “something that impacts on the productive potential of the younger plants, but it is beneficial for crops that are maturing and close to harvest, as they increase the concentration” of sugars in cane.

 

Moderate temperatures also curtailed crop stress in the state.

 

However, for the key growing state of Sao Paulo, Conab trimmed its cane crop estimate, by 1.50m tonnes to 335.5m tonnes, saying that recent data “already point to a certain shortage water impacting on the average yield estimates for the crop”.

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