Brazil ditched expectations of a rise in sugar output this season, as it slashed hopes for its cane harvest to an 11-year low, citing damage from lingering weather upsets, and a switch by farmers to growing corn and soybeans.

Conab, Brazil’s official crop bureau, lowered by 2.48m tonnes to 33.89m tonnes its forecast for domestic sugar output in 2022-23, the smallest result in three years.

The revision, which took the total below the 34.94m tonnes produced last season, reflected weakened expectations for this season’s cane crop – which was also, thanks to a downgrade of more than 23,000 tonnes, now seen falling below the year-ago result.

Indeed, at 572.9m tonnes, this season’s Brazilian cane harvest was estimated dipping by 12.30m tonnes year on year to its lowest since 2011-12.

Cane vs corn

The cane crop downgrade reflected in part a cut to the area figure, as strong grain markets encouraged growers to plough up cane in favour of alternative crops.

“The great demand for areas for the cultivation of soybeans and corn, due to the attractive prices of the grains, was pointed out as the main reason for the loss of 217,300 hectares of production area,” year on year, Conab said.

At 8.13m hectares, Brazil’s cane area for this season was pegged at the lowest since 2010-11.

However, yield expectations were cut too, by 2.12 tonnes per hectare to 70.48 tonnes per hectare, thanks to more of the weather setbacks which depressed last season’s result to 69.36 tonnes per hectare.

In the key Centre South Region, “the predominance of low rainfall during most of the crop cycle,” besides an ageing cane profile in the likes of Parana, “justifies the reduction” in yield hopes.

Sao Paulo woes

Weather had proven particularly adverse in the Centre South state of Sao Paulo, the top cane-grower, where the harvest was downgraded by nearly 18,000 tonnes, to 283.4m tonnes – the weakest result in 17 years.

The La Nina weather pattern “has had consequences on the climatic conditions observed in Brazil, particularly in the Centre South, by reducing the volumes of precipitation in some periods,” Conab said.

While conditions at the start of this season were “less adverse… with higher rainfall than in 2021-22, the outlook still points to a slight reduction in average yield” from the previous estimate.

Ethanol vs sugar

Conab also reduced its estimate for the proportion of cane directed at making sugar, rather than ethanol, this season to 48.4%, down by 1.4 points on the April forecast.

Mill are prioritising “ethanol to the detriment of the production of sugar”, thanks to the relative “economic situation” of the two products.

Nonetheless, the proportion remains up on last season’s 44.4%, with the bureau also noting that output levels were supported by the relatively large amounts of sugar that mills had sold forward, with the sweetener, with actively-traded futures, relatively easy to hedge.

“In addition, the mismatch between supply and post-pandemic demand growth has maintained good prices, as the main competing countries, India, Thailand and Australia, have not been able to increase their offers.”