Brazil cane harvest to fall in 2017-18 - but sugar output to rise

24.11.2016

The cane harvest in Brazil's key Centre South region will fall back towards a five-year low next season – but the drop will not be reflected in output of sugar itself, which will nudge higher to a fresh record high, Green Pool said.

The Australia-based analysis group - in its first forecast for the Brazil Centre South cane crush in 2017-18, on an April-to-March basis – pegged it at 585m tonnes, down 12m tonnes year on year.

The decline "is largely due to a very small amount of standover, or bisada, cane from the current harvest," with mills in the Centre South in fact tending to close earlier this season for seasonal downtime because of the lack of cane still left to cut.

However, sugar output in the Centre South, which is responsible for some 90% of Brazil's total production of the sweetener, will nudge higher nonetheless for second successive season, this time by 200,000 tonnes to an all-time high of 35.2m tonnes.

Sugar vs ethanol

The forecast reflects in part expectations of a higher sugar content in the cane next season, at 47.1% - up by 0.8 points on the "very strong" figure for 2016-17.

Cane yields will also be stronger, "since the crop has longer to grow, and should be more mature".

However, Green Pool's estimate also reflects ideas that mills will continue to increase the proportion of cane they process into sugar, rather than ethanol.

"Ethanol [production] will suffer further, down a further 610m litres to only 24.49bn litres" in 2017-18, the analysis group said.

'The only certainty'

The forecast of a lower cane crop in 2017-18 tallies with some other comments from market observers, including Unica, the Brazilian cane industry group, which said last month that "the only certainty we have at this point is that the new [2017-18] crop will be smaller than the current" one.

The group's technical director, Antonio Padua Rodrigues, said that the forecast was a reflection of a long period of low investment in cane crops, thanks to the spell of weak prices which prevailed until earlier this year.

Brazilian consultancy Datagro has forecast the Centre South cane crop next season at 580m-610m tonnes.

'Damage to the consumption side'

Green Pool's forecast came as the group trimmed by 520,000 tonnes, raw value, to 5.28m tonnes its forecast for the world sugar production deficit in 2016-17, reflecting the dent to demand from the recovery in prices of the sweeteners to four-year highs.

"Sugar prices have pushed to their highest since 2012, undoubtedly doing some damage to the consumption side of the sugar equation," the group said.

Green Pool also reduced by 870,000 tonnes, to 7.52m tonnes, its forecast for the global sugar output deficit in 2015-16.

The revised estimate "will take global stocks-to-use to 39.9% at end September 2017, the lowest since 2011-12, but not as low as the end stocks-to-use in 2009-10 or 2010-11".

The stocks-to-use ratio - in indicating the availability, and thus the extent to which buyers will be forced to pay up to secure supplies – is viewed as a key pricing metric in commodity markets.


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