Asian food trader Wilmar sees Brazil sugar output falling sharply

NEW YORK: Brazilian sugar production should fall sharply in the new season that started in April, as unfavorable weather continues to hurt sugar cane growth across the center-south region, Asian commodities trader Wilmar said on Tuesday.

Wilmar expects Brazil's center-south cane crop to fall to 530 million tonnes in 2021/22, compared with 605 million tonnes in the previous season, with sugar production dropping to 31 million to 33 million tonnes from 38.5 million tonnes.

The trader's projection is the smallest among traders and analysts so far. Most were expecting lower sugar production in Brazil after the record set in the last season, but most estimates were around 35 million tonnes.

Raw sugar prices jumped more than 3% in New York this morning, underpinned by bad weather for crops in Europe and in Brazil.

"We flag the possibility of a further reduction in our crop forecast should rainfall not improve quickly continuing the period of water stress for the crop," Karim Salamon, head of sugar market analysis at Wilmar, said in a note.

The company also projected a sharp reduction in ethanol production in Brazil's center-south in 2021/22 to 23 billion to 25 billion liters, from 27.8 billion liters in the previous season.

Salamon said that with a potential recovery in transport fuel demand and ethanol consumption expected in 2021, there may be an ethanol deficit of more than 5 billion liters.

"It is likely that sugar and ethanol have to compete (with) each other fiercely as we are heading toward a global shortage of sugar equivalent (sucrose) by nearly 12 million tons," the analyst added .