Sugar output in Brazil’s Centre-South region was smaller than expected in the second half of May, with the amount of cane allocated by the mills to sugar production missing analysts’ estimates for a second time in a row, data showed on Friday.
Brazilian mills produced 2.7 million metric tons of sugar in the period, 7.72% less than a year earlier. Cane crushing fell 3.36% to 45.2 million tons, while ethanol production was only marginally smaller than last year (-0.2%) at 2.12 billion liters, industry group UNICA said in a crop report.
A survey by S&P Global Commodity Insights said earlier in the week that analysts were expecting sugar production of 2.9 million tons, and cane crushing at 46.64 million tons.
Mills allocated 48.28% of sugarcane to sugar production, also below market estimates and even below last year’s 48.65%. Analysts were expecting the allocation to sugar, the so-called sugar mix, at 49.83%.
The sugar mix was also below estimates in the previous report, causing some surprise in the market, since most players were expecting a high sugar mix this season after investments by mills to expand their capacity to make the sweetener, and as sugar prices remain more profitable than ethanol prices.
UNICA’s director Luciano Rodrigues said the quality of the cane is probably the main reason for lower sugar production. He said there is some old cane from the previous season still being processed, as well as cane that did not developed as it should due to unfavorable climate conditions.
“Either cane yield is already dropping and/or mills are already slowing their crush due to cane that is not yet mature due to dry weather,” said a U.S.-based sugar broker.
“Either way, this would appear to be bullish,” he added.
Source: Reuters (Reporting by Roberto Samora and Andre Romani in Sao Paulo, Marcelo Teixeira in New York; Editing by Gabriel Araujo, Chizu Nomiyama and David Gregorio)