Brazil cane crush, sugar output extend forecast-beating run
Sugar output in the Centre South, which is by far the world's top sugar producing region, was up 68.4% year on year, helped by an abundance of cane to cut, relatively dry weather, and a high proportion of sugar available in the cane.
But markets showed a muted reaction, as a strong start to the Brazilian season is factored in, with all attention now on the wet weather developing across the Centre South, which could disrupt production there.
Brazilian cane crushers in the Central Belt processed 39.49m tonnes of sugarcane in first half of May an increase of 37.7% from the same period last year. The cane crush was even bigger than expected, with a survey of analysts by Platt's Kingsman pointing to 38.34m tonnes.
There is an abundance of cane available for cutting this season, after wet weather kept workers out of the fields during the previous marketing year.
Still, this fell short of the record for the first two weeks of May, which was the 40.42m tonnes of cane cut in 2013.
"The dry weather and a fast pace of harvesting last month resulted in 69m tonnes of cane crushed," Platts said. "But the first period of May was wet with roughly 1.7 days lost to rain."
More cane was diverted to sugar production than at the same time last year, with 44.0% of cane going to sugar, due to higher prices for the sweetener, and continued weak local ethanol demand.
A much great proportion of ethanol produced was anhydrous ethanol, which is usually produced for export, rather than hydrous ethanol, which is used domestically in Brazil's huge fleet of flex-fuelled vehicles.
And thanks to dry weather over the period, the proportion of recoverable sugar was higher as well. Sugar content in cane is undergoing its usual seasonal increase, as the cane cutting season gets going in earnest, and more mills open.
Overall, this meant that sugar production in the period was 63.4% higher than last year, at 2.06m tonnes. Still, the proportion of recoverable sugar per tonne of cane proved somewhat lower than analysts were expecting.
This meant that total sugar production in the period was only 35,000 tonnes higher than analysts were expecting.
But the numbers are still heavy, with total production so far this season now 98.5% higher than at this point last year.
Ideas of a very strong start to the Brazilian season have been well digested by traders, and markets largely shrugged off the news.
Raw sugar futures showed little price reaction, although they are down on the day, as they continue to retreat from the two-year high they touched on Tuesday, fuelled by ideas that weather in Brazil is about to take a wetter turn, which will delay cane cutting, and disrupt exports.
Nick Penney, senior trader at Sucden Financial, said that rain this week has been factored in "for the time being," but the market remains on "weather alert".
July raw sugar futures were down 0.7% on the day in early afternoon deals in New York. ■