Brazil's faltering sugar output has created a supply gap that is being filled by alternative origins, triggering uncertainty for refiners who would normally use the Brazilian sweetener, commodities house Czarnikow said on Friday. Brazil's center-south 2012/13 sugarcane harvest is struggling to expand this year after disappointing output in the 2011/12 season, which was caused by a mixture of bad weather and overdue replanting of ageing cane plants.
The global sugar surplus is forecast to halve to around 3 million tonnes in 2012/13 (October-September) from a surplus of 6.5 million tonnes in 2011/12, the International Sugar Organisation (ISO) said on May 11. "Despite a return to surplus, the path taken has been surprising, with Brazil faltering and production elsewhere bridging the gap," London-based Czarnikow said in its latest monthly report. "This causes uncertainty for refiners, many of whom have rarely operated with sugar from sources outside of Brazil."
Brazil is the world's leading sugar producer and exporter. Increased milling capacity has facilitated production growth in many origins, Czarnikow said. "Thailand, for instance, managed to accommodate a 40 percent increase in cane throughput availability, whilst China and India's industries have come close to historic highs," the report said.
In the EU and the CIS, beet industries have also shown their industrial base can accommodate improved agricultural output, Czarnikow said. "Compare that with Brazil, where costs have risen as productivity falls, despite higher sugar prices globally," it said. "This situation is exacerbated by the falling return from ethanol in real terms as a result of energy prices being capped by the Brazilian government. "These factors have held back growth in Brazil's cane acreage, and coupled with falling cane yields, means that some of the country's expanded industrial capacity is sitting idle."