Brazil's main cane belt produced a record amount of sugar in an early start to the harvest season, industry association Unica said, sending prices lower in New York despite expectations of a global deficit in the sweetener this year. In its first forecast of the season for the world's largest sugar producer, Unica said mills in the region will crush between 605 million and 630 million tonnes of cane in 2016/17 compared with the 617.7 million tonnes crushed in the season that ended on March 31.
Sugar output this season is likely to be the highest in the past three years at 33.5 million to 35 million tonnes, up from the 31.2 million produced last season, Unica said. Sugar futures prices on the New York ICE exchange began falling shortly before the release of Unica data and were last down 1.7 percent at 15.51 cents a pound.
News from Unica that mills produced a record 1.43 million tonnes of sugar in the first half of April, up 261 percent from a year ago, also helped pressure futures prices. It is one of the industry's earliest starts to the crushing season as mills try to get a jump on the bumper crop. Ample rains in late 2015 and early 2016 have boosted the yields from cane fields to their highest since 2009, Unica said.
But dry weather in recent weeks helped mills crush the massive crop virtually uninterrupted, Unica said. The association said 205 of the region's roughly 300 mills were operating by mid-April compared with 137 in late March. The region produced 1.27 billion liters of ethanol in early April, up 124 percent from a year ago, it said. Prices for the biofuel have fallen sharply in recent weeks, surprising mills and analysts alike.
The weaker returns from ethanol, the relatively weak rate of the real to the dollar and forecasts for a global sugar deficit after several years of glut are expected to induce mills to produce as much sugar as capacity permits, analysts say. Czarnikow on April 14 became the latest sugar industry expert to raise its forecast for an anticipated global supply deficit of the sweetener.