Brazil Sugar Output Seen Growing, but Global Supply Falls -FCStone

(NASDAQ) – Brazilian mills are expected to increase the amount of cane they allocate to sugar production next season due to better prices for the sweetener, which will lead to a rise in sugar output of 3 million tonnes, broker and consultancy INTL FCStone said on Wednesday.

FCStone expects Brazil’s center-south to produce 29.6 million tonnes of sugar in the 2019/20 season that starts in April versus 26.3 million tonnes in 2018/19, which was the country’s smallest output in years and almost 10 million tonnes lower than in the previous crop.

The consultancy sees global sugar supply falling in 2018/19 (Oct-Sept), while consumption grows. As a result it projected the 2017/18 large surplus of 9.6 million tonnes – which pushed sugar prices to ten-year lows – to fall to a surplus of only 1 million tonnes in 2018/19.

“Most indications point to a reduction in the stability of sugar production in the next cycle starting in October 2019, potentially leading the market to a deficit situation,” said FCStone in its report.

It estimated center-south cane crush at 564.7 million tonnes next season, 0.4 percent smaller than the previous crop. With no increase in cane supply and expectations for higher sugar output, ethanol production should fall, the consultancy said. That would come despite expectations for higher fuels demand in Brazil next year as the economy recovers.