Sugar futures tumble on heavy Brazilian cane crush

18.07.2016

Cane mills in the Brazilian Centre South cane belt more than doubled sugar production over the second half of June, as dry weather allowed workers to get back into the fields after weeks of delays.

Data from Unica, the Brazilian cane body, showed Centre South sugar production over the second half of June at 2.79m tonnes, compared 1.20m tonnes in the first half of June, up 10% year on year.

The result was ahead of the 2.56m tonnes forecast in a Platts Kingsman survey of analyst.

Sugar futures fell more than 3% on the news.

Harvesting speeds up

The increase in sugar production was the result of drier weather, which allowed the pace of cane cutting to increase.

Drier weather also led to a higher proportion of recoverable sugar per tonne of cane, and encouraged mills to switch more cane to ethanol, rather than sugar production.

47.89m tonnes of cane were crushed over the period, compared to just 25.70 tonnes in the first half of June.

Rapid pace so far this season

Total sugar output since mills started the season in April is some 20% up from a year ago, at 10.98m tonnes, Unica said.

The higher production reflects a more rapid pace of crushing, after the previous season which saw wet weather and low sugar prices slowing output.

The higher price of sugar is encouraging mills to favour sugar, which is mostly destined for the export market, rather than ethanol for use as biofuel.

Ethanol output so far this season is down nearly 4% from last year.

Futures markets tumble

Raw sugar futures turned sharply lower on the news, and a drop in the value of the real helped accelerate the decline.

A weaker real means a higher local-currency price for sugar, encouraging production, as well as incentivising mills to favour producing sugar for export, over ethanol for local production.

The real was down 0.7% against the dollar in midday deals.

October raw sugar futures in New York were down 3.2%, at 19.28 cents a pound.


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