Brazil center-south cane millers to produce lowest sugar

Millers in Brazil's center-south cane belt will divert less of a smaller-than-expected crush to sugar than previously forecast this year, causing output to fall 14 percent from the prior season, commodity brokerage INTL FC Stone said on Tuesday. Brazil's center-south region will produce 31 million tonnes of sugar in the current 2018/19 crop cycle, down from a March estimate of 31.5 million tonnes and from 36.1 million tonnes last season, according to prepared remarks from the firm at an industry event during New York "Sugar Week."
That would represent the lowest production for the region in nine years, Bruno Lima, head of INTL FC Stone's Sugar & Ethanol Group in Campinas, Brazil, told Reuters. The revisions came as raw sugar prices plumb 2015 lows amid a glut of production in key producers, including India and Thailand. Even with the reduced expectations for output in Brazil, the world's top producer and exporter, total global production will outstrip demand by 7.2 million tonnes in the October-September 2018/19 crop year. That follows a world surplus of 10.8 million tonnes in 2017/18.
Brazil "is definitely doing our part to help sugar prices," said Lima. "However it's not enough." Brazil's center-south region will crush 587.7 million tonnes of cane in 2018, down from a previous estimate of 590.7 million tonnes and from 2017/18's 596.3 million tonnes. Dry weather will reduce cane crushing but improve yields, Lima said.
Millers will dedicate 59.2 percent of their crop to the production of ethanol, boosting production to 27.7 billion liters. That compared with 53.5 percent and 26.1 billion liters in 2017/18 and is the most ethanol produced from sugar in three years. When ethanol from corn is taken into account, it would represent record production of the biofuel in the region, said Lima.
Millers are underhedged, which suggests prices will stay under pressure, Lima said. Millers have hedged about 44 percent of their output against the July raw sugar contract on ICE Futures US. That compared with 76 percent a year earlier.