Home > Articles > Brazil Area’s Sugar-Cane Crop Seen by Alta Mogiana Falling 7.1%

Brazil Area’s Sugar-Cane Crop Seen by Alta Mogiana Falling 7.1%

March 7th, 2014

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Category: Sugar

(Businessweek) – Persistent dry weather in Brazil’s center south, the main sugar cane-growing region of the world’s top producer, will probably cut output for this year’s crop by 7.1 percent, according to Usina Alta Mogiana SA.

Millers in the area may process 554 million metric tons of cane in the 2014-15 season that starts there next month, estimates the Sao Joaquim da Barra-based company, in the state of Sao Paulo, which plans to crush 5.3 million tons this year. That compares with a crop of 596 million tons a year earlier.

“We are currently working with this as a base scenario, but the weather can still change,” Marcos Mine, a risk manager at the miller, said by phone today. “If rain increases in the next two months and we get the same unusual wet weather in June and July as last year, we may have more cane. However, the most likely scenario is that the weather will remain dry and that may mean a risk to the downside from the current forecast.”

Raw sugar futures traded in New York climbed 12 percent this year on speculation dry weather will cut output in Brazil. Prices fell in the past three years, the longest slump in more than two decades, as global supplies outpaced demand. Brazil’s southeast region, where most of the country’s sugar cane grows, got three times less rain than usual in January, according to Sao Paulo-based weather forecaster Somar Meteorologia.

The sugar-cane crop in the center south could fall to as low as 538,000 tons under a pessimistic scenario or reach 575 million tons if rains during the dry season help develop cane cut in November and December last year, Mine said. That is the part of the crop being affected the most, as it didn’t receive enough water to re-grow, he added.

Ethanol Production

Millers will probably direct 44.2 percent of the crop to make 32 million tons of sugar, Alta Mogiana estimates. That compares with 45.2 percent and 34.3 million tons a year earlier. Ethanol production will probably be 24.5 billion liters from 25.5 billion liters in 2013-14, the miller said. Brazil uses sugar cane to make both the sweetener and the biofuel. Most cars in Latin Amrica’s biggest economy can run either on pure ethanol or on a blend of ethanol and gasoline.

“Due to the rising flex-fuel fleet, the possibility of an increase in the anhydrous ethanol blended into gasoline from 25 percent to 27.5 percent, as well as a real need for Petrobras to raise gasoline prices” ethanol production may not experience a big decline, Alta Mogiana said in the report.

Sugar production in the center south could reach 30.5 million tons under the pessimistic scenario, the lowest since 2009-10, according to Alta Mogiana. Ethanol output would be 24.2 billion liters in that case. Under the most optimistic scenario, sugar output could reach 33.2 million tons and ethanol production 25 billion liters, according to the report.

The cost of producing sugar in the area could rise to as much as 17.5 cents a pound from 16 cents a pound last season, depending how much of the crop is lost to dry weather, Mine said. About 50 percent to 60 percent of the area’s production is already sold at an average 17 cents to 18 cents a pound, and rising costs could squeeze millers’ margins and force them to buy back futures sold, he added.

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