Sugar futures rally, as rain slows Brazilian cane cutting

16.09.2016

Sugar futures rallied, as data showed a late August decline in the pace of production in the country's main Centre South cane belt, according to data from the cane industry body Unica.

Output in the biggest cane growing region in the world was down 11% year-on-year over the second half of last month, as wet weather hampered harvesting.

Mills in the region produced 2.54m tonnes of sugar in the period, down from 2.97m tonnes over the second half of July.

This was an even sharper drop than markets were expecting, with a Platts survey of analysts forecasting production at 2.67m tonnes in the latest period.

Pace of crushing slows

The pace of cane crushing in the first half of August was down even more sharply with 38.31m tonnes of cane crushed, down some 9m tonnes from the same period of 2015.

But mills continue to favour sugar production over ethanol compared to the previous season, with some 48% of cane cut going to sugar, compared to 43% over the same time last year.

So far this season, mills have been cutting cane fast due to mostly dry weather across the belt, and favouring sugar production due to higher prices for the sweetener.

Sugar production is up 17% so far this season, at 22.42m tonnes.

Sugar rallies as front month expires

Thursday also sees the expiry of the October contracts in both New York raw sugar, and London white sugar.

Markets will be paying close attention to how much, if any, sugar is delivered against the expiring contracts.

March raw sugar futures in New York were up 1.7% in morning deals, at 21.09 cents a pound.

December white sugar futures in London were up 1.4%, at $554.20 a tonne.



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