Brazil sugar output steady despite rains in early July

July 25th, 2014

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Category: Sugar

(Reuters) – Sugar output from the world’s biggest exporter of the commodity Brazil stayed unexpectedly strong in the first half of July despite a few days of rain that typically slows harvesting, the cane industry said on Thursday.

After futures markets looked past the otherwise bullish news of a 6 percent drop in cane crushing versus late June due to rain, the New York ICE sugar front month contract pared back early gains on the surprisingly strong sugar output.

Mills in the main center-south cane region churned out 2.55 million tonnes of the sweetener from July 1 to 15, just slightly off output of 2.58 million tonnes in the second half of June when weather was ideal, industry association Unica said in its latest biweekly report.

The numbers are likely to continue to weigh on prices which ended the day not far off July lows at 17.05 cents/lb. Mills’ decisions to allocate more of their cane crush to sugar than they did last month will likely underscore this pressure from the supply side.

“It’s natural for companies to take advantage of the moment when cane is more suitable for sugar production (than ethanol) to produce the sweetener and cover their necessary future commitments for delivery,” Unica’s technical director Antonio de Padua Rodrigues said.

Mills maintained sugar output under the moister conditions of July by allocating more of their crush to production of the sweetener, while easing off production of ethanol. In the first half of the month, 46.4 percent of the cane crushed went to sugar production compared with 45.6 percent in the final half of June, Unica said.

The cumulative sugar output numbers remain bullish as well with production up 13 percent from last year at 12.89 million tonnes by July 15.

The cost of maintaining sugar output under wet conditions played out in the ethanol numbers. Output of the cane-based biofuel eased to 1.81 billion liters in early July, versus 1.90 billion liters in the second half of June.

Unica said in its previous report released earlier this month that crushing of the 2014/15 cane crop in the center-south would likely end earlier than previously anticipated because of the drought limiting the size of the total cane crop.

While the crushing campaign was expected earlier this year to last from March through December, harvesting is expected to wind down in November due to the smaller crop and rapid progress in the early half of the crushing season.

“The speed of the CS Brazil crop, the prompt surplus and slow demand combined is affecting not just off-take but physical values as traders try to find homes for the sugar,” commodities advisers Agrilion said after the release of Unica’s report.

Agrilion added that spot Brazilian raw sugar from Santos was offered a year ago at a 10-point discount to the October 2013 contract, while last week the same quality of sugar was offered at a discount of 60-70 points to the October 2014 contract.

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