SAO PAULO: Drought will drive sugar production in Brazil's cane-rich center-south nearly 8 percent lower than last year, hammering the world's main supplier of sugar, commodities market analysts Datagro said.
Brazil's main center-south cane region will produce 31.6 million tonnes of sugar in 2014/15, down from 34.3 million last year and 32.3 million tonnes seen a month ago due to a severe drought, Plinio Nastari, president of Datagro said on Monday.
The world's top sugar producing region is unlikely to recover next season, he said, predicting sugar output of between 29.1 million and 31.3 million tonnes in 2015/16.
New York ICE sugar futures were relatively somber, as was the mood the mood at the two-day Datagro conference on sugar and ethanol in Sao Paulo.
Before dawn Monday, a fire razed a warehouse owned jointly by Cargill and Louis Dreyfus at the main sugar port in Santos, the third major sugar warehouse fire in a year.
A major national milling group GVO revealed over the weekend that it began debt talks with creditors, the latest of scores of mills in the past several years to undergo restructuring.
GVO is one of the founding groups of the country's largest sugar and ethanol trader Copersucar, whose 10-million-tonne port terminal in Santos lost most of its capacity a year and two days ago.
"Brazil's sugar and ethanol industry is living through its worst crisis in history," Nastari told a conference room full of sugar executives and traders in opening remarks at the conference.
He also spoke of a potential for a turnaround in sugar prices in the near future as the world shifts from a glut in sugar into a 3.24 million tonne production deficit in the 2014/2015 year beginning in October.
In Brazil, the center-south cane crush will drop to 550.2 million tonnes this year from 597 million tonnes in 2013/14. Output next year will not differ greatly from this year. Mills are expected to crush 520 million to 560 million tonnes.
Monday was marked by a drop in temperature as isolated showers spread over the center-south cane belt that has been decimated by drought. Although the rains turned out to be light, they are seen as a precursor for the first major storm of the spring rains since the dry season started some-six months ago.
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