Mills in Brazil's main center-south cane growing region will produce 32 million tonnes of sugar in the 2015/2016 crushing season, unchanged from the upwardly revised output for the current season, independent commodities analyst Datagro said on Thursday.
While presenting his first estimate of the new crop, Datagro President Plinio Nastari also raised his view of sugar output at the tail end of the season that ends on March 31 to just over 32 million tonnes from the October estimate of 31.6 million tonnes.
Nastari also raised his view of the final crushing figures for this season to 570 million tonnes of cane in the center-south from 550 million seen in October.
Even though Nastari said the region was unlikely to produce more sugar next season, ICE futures prices for the commodity eased on Thursday. Some traders said the higher output numbers for the present crop took them by surprise. Others cited the return of rains to Brazil's parched cane belt and concerns over the potential for India to raise subsidies for sugar exports as also weighing on prices for the sweetener.
Datagro expects the global production deficit in sugar at 2 million tonnes in the 2014/15 (October-September) season - down from the 2.35-million-tonnes surplus last season - largely because of Brazilian mills' preference for ethanol production, which is expected to become more profitable than sugar after the reintroduction of taxes on gasoline. The local ethanol blend is expected to increase to 27 percent from 25 percent.
"With the better returns from ethanol, we will be approaching the point when we will exhaust our capacity to produce ethanol," Nastari said. He said no new investments are expected soon in ethanol production capacity. Nastari said he expects the percentage of cane devoted to sugar to fall from 45 percent this season to 43 percent in the coming season.
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