Conab trims Brazilian sugar output forecast

21.12.2016

Conab, the Brazilian crop supply agency, trimmed its estimate for the sugar season just finishing, although production is still up strongly from last year.

Conab saw 2016-17 sugar production in the Brazilian Centre-South cane belt at 36.3m tonnes, down from the 36.5m tonnes forecast in August, but still up some 18% year-on-year.

Across the whole country, Conab forecast sugar production at 39.8m tonnes, down from the 39.9m tonnes forecast previously.

According to the Brazilian cane industry body Unica, production in the cane belt reached 34.7m tonnes as of the end of November.

FCStone's latest forecast for Centre-South production stands at 35.3m tonnes.

Increase sugar mix

The increase in sugar production was helped by rising in planted area, thanks to a large amount of cane left over from the previous season, when rain disrupted harvesting.

And more of the cane produced was diverted to sugar production, rather than to ethanol.

"The price of sugar in the foreign market tends to increase the proportion of sugar," Conab said.

Currency effect

Sugar prices are being helped by ideas of a global production deficit this season, Conab said.

And currency fluctuation supports producing sugar, for dollar sales in international markets, rather than ethanol which is primarily consumed locally in Brazil's huge biofuel market.

"The appreciation of the dollar is favouring exports which, coupled with the good prices practiced internally, drives mills to increase sugar production instead of ethanol," Conab said.

Conab also noted the opening up of European Union to sugar imports next year, combined with stagnant ethanol demand, spurring mills to higher sugar production.

Prices edge lower

But Conab was upbeat on long term ethanol prospects, due the potential for higher oil prices.

"The increase in world demand for ethanol from renewable sources, coupled with large cultivable areas and a climate favourable to sugarcane, make Brazil a promising country for the export of this commodity," Conab said.

March raw sugar futures in New York was down 0.1%, at 18.21 cents a pound, near the seven-week lows of last week.


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