Brazil CS cane crush to rise, but sugar output to drop

(Agrimoney) – Unica forecast a rise in the cane crop in Brazil’s key Centre South region, but a fall in sugar output, in a more downbeat estimate for production of the sweetener than some other commentators.

The sugar and ethanol industry group – in its first estimates for the 2015-16 season which started last month – forecast an increase of 18.7m tonnes to 590.0m tonnes in the cane harvest in the Centre South, which is responsible for some 90% of Brazilian output.

Unica flagged “improved weather conditions observed so far” for supporting cane yields, after a 2014-15 season marked by drought in central Brazil.

Indeed, Unica technical director Antonio de Padua Rodrigues said that the extra moisture “should mask” the depressant to cane yield prospects from an ageing profile, after mills, in the face of low sugar prices besides drought, cut replanting rates.

‘Biofuel-friendly recipe’

However, the region’s production of raw sugar will ease by 190,000 tonnes to 31.8m tonnes nonetheless, in part thanks to the improved moisture levels seen lowering sugar content in cane, as crops use up their reserves for growth.

In fact, there “is a possibility of blooming cane in some areas”, a negative for sugar yields, and Unica said that it had also in the last month noted lodged cane, flattened by strong winds.

Meanwhile, mills will, encouraged by market prices, increase further the proportion of cane used to ethanol, rather than sugar, to a seven-year high of 58.1%.

“Future prices of sugar in the international market, and the potential ethanol price in the domestic market, still show a recipe favourable for making biofuel,” Mr Rodrigues said.

Centre South production of ethanol, demand for which has been supported by tax and blending changes in Brazil, will rise by 4.3% to 27.28m litres.

Range of estimates

The sugar output estimate is below estimates from some other commentators, including Platts Kingsman, which last week pegged production at 33.2m tonnes, on a cane harvest of 585m tonnes.

Datagro a week ago pegged output at 32.2m tonnes, on a cane crush of 591m tonnes, while Jon Economia on May 11 pegged Centre South cane output at 32.3m tonnes, on a cane harvest of 587m tonnes.

US Department of Agriculture officials earlier this month estimated the cane harvest at 590m tonnes, and sugar output at 32.5m tonnes.

‘Rather worrying situation’

Unica added that the poor financial position of Brazil’s cane mills, which are famously laden with debt, would likely prompt the closure of 10 plants this season, with a loss of 12.5m tonnes of cane a year in crushing capacity.

Closures at this level would take to 57 the number of mills shutting in five years, against eight mill openings.

Depressed revenues, combined with mounting financial expenses, had “produced a rather worrying situation” in the sector, with mills paying, on average, the equivalent of 15% of turnover in interest payments in 2013-14.

“The gradual loss of capacity could make it difficult for mills to crush all the cane available for harvesting in 2015-16 if the weather is more rainy than that historically seen,” Mr Rodrigues said.