Sugar prices extended their recovery as disappointing data on Brazilian production added to the support from firm energy markets, after China eased Covid restrictions.
Raw sugar futures for October, the best-traded contract, stood up 1.4% at 18.51 cents a pound in late-morning deals in New York.
London white sugar for October added 1.2% to £528.50 a tonne.
The gains were attributed in part to strength in energy markets, after China announced that mainland quarantine requirements for all arrivals would be cut from 21 to 10 days, and some recovery in the Brazilian real, which edged 0.3% higher against the dollar.
A firmer real boosts the value, in dollar terms, of assets over which the South American country, the top sugar producer and exporter, has a big influence.
Furthermore, the market gained support from data from industry group Unica showing that Brazilian Centre South sugar output for the first half of June, at 2.14m tonnes, came in shy of investor expectations of a 2.40m-tonne figure, as forecast by analysts surveyed by S&P Global Commodity Insights.
Mills in the Centre South, which is responsible for more than 90% of the country’s sugar output, crushed, at 38.6m tonnes, less cane than the 42.2m tonnes expected by the S&P Global survey.
The cane was also of lower quality than last year, containing 131.0 kilogrammes of sugars per tonne compared with 138.5 kilogrammes in the first half of June 2021.
Mills are too converting more cane into ethanol, rather than sugar, this season, with the ethanol take at 55.6% in the first half of this month, up by 1.8 points year on year, and beating investor expectations too.
Full season outlook
Unica said that that weaker quality of cane looked likely to be reflected in results for the full season, as ends in March 2023, given that it now looked entrenched.
For 2022-23 up to mid-June, cane had yielded an average of 124.5 kilogrammes of sugar per tonne of crop, down from 130.7 kilogrammes for the same period of last season.
“A reduction of more than 3 kilos of [sugars] per tonne of processed cane should be observed at the end of this agricultural cycle,” said Antonio de Padua Rodrigues, the Unica technical manager.
Furthermore, he noted the decision by mills to focus more cane at making ethanol, with sugar’s take of the Centre South crop so far this season at 41.6%, down from 45.3% a year ago.
Mills had “reduced the production of [sugar] by an additional 1.03m tonnes to enable greater production of ethanol”.