Lower Brazil's sugar output to tighten world supply

Dry weather is trimming sugar output from top supplier Brazil, a development that should support future prices and could prompt some mills to cancel delivery contracts, analysts at Datagro said. With harvest reaching top gear after a slow start to the season due to excess rainfall through early April, the long lines of ships waiting off the southern coast should ease as the full flow of sugar hits the main ports, Datagro said.
"We're on alert because the world supply of sugar will depend on Brazil until October, when the Northern Hemisphere crops come online," Datagro President Plinio Nastari told reporters on Thursday.
Brazil's main center-south sugarcane crop that began crushing in April should produce 33.7 million tonnes of the sweetener this season, down from the 35.15 million tonnes projected in April, Nastari forecast. The region, which accounts for 90 percent of Brazil's sugar output, had 60 days without rain since April. The recent lack of rain worsened crop conditions that were already bad due to a long dry spell in 2010 and a lack of investment in the renewal of fields over the past few years, Nastari said.
Datagro lowered its outlook for the center-south cane crush to 536 million tonnes from its 561 million tonne April estimate. It also cut its estimate of Brazil's total cane crush to 600.5 million tonnes from 623 million tonnes seen in April.
Ethanol production in the center-south was put at 23.2 billion liters, down from 25 billion liters in the April forecast. Datagro estimates 53 percent of the cane crush in the region will be directed to the production of the biofuel, down from 53.8 percent seen in April and 55.3 percent last season. This is the first annual drop in Brazil's cane output in 11 years. In 2010/11, the center-south produced 33.5 million tonnes of sugar and 25.4 billion liters of ethanol, crushing nearly 557 million tonnes of cane.
Datagro estimates a sugars content of 140.5 kilograms per tonne of cane in 2011/12, below last season's 141.2 million tonnes, and a 7-percent drop in the expected amount of cane per hectare, due mainly to the adverse weather conditions.
"There are cases of cane flowering now, which leads to lower sugars content, and flattening due to strong winds. We're also noting a higher infestation of pests and diseases." Sugar exports from the main center-south crop should drop in line with the reduced output from the region to 24.22 million tonnes this crop from the 25.65 million tonnes seen in April. This should support world sugar prices since Brazil accounts for more than half of the international sugar market.
Nastari added that some mills may be forced to renegotiate delivery contracts, due to the smaller-than-expected sugar output this season, but he had not yet confirmed that theory. Ship line-ups at Brazilian ports have stabilised at around 60 vessels waiting to load sugar. Trade sources and shipping agents said the long lines were due to the slow start to the crushing season.
Nastari said line-ups should return to normal in a month or less as the flow of sugar to the port silos picks up. Datagro projects a global sugar surplus of 6.5 million tonnes in 2011/12 (October-September), up from a surplus of 2.7 million tonnes in the previous season as output grows in countries such as Thailand and some in Europe. But the stock/consumption ratio is seen at below 36 percent, still down from the 40-42 percent range considered "normal". "This (6.5 million) surplus is still insufficient for the world's sugar pipeline to return to normality," he said.