Sugar futures approached a two-month high after a report showed that “pretty intense” rains depressed Brazil’s sugar production by more than had been expected in late September, underpinning expectations that full-season output may stay below some earlier estimates.
Brazil’s Centre South region, which is responsible for some 90% of the country’s sugar output, produced 1.70m tonnes of the sweetener in the second half of September, industry group Unica said.
That represented a 41% plunge in the volume produced in the first half of last month, besides being a 27% fall year on year.
The figure also came in markedly below the 1.96m-tonne number that investors had expected, even allowing for some setbacks from rains which slowed the cane harvest.
‘Pretty intense’
Official meteorological data show that “rainfall was pretty intense” in the Centre South in the second half of September, “mainly in the states of São Paulo, Paraná, Mato Grosso do Sul and the south of Minas Gerais,” Unica said.
“This event hampered the progress of harvesting operations and the industry which, consequently, was responsible for the decrease in… production.”
In fact, the cane crush itself slumped to 25.29m tonnes – down 36% from the volume processed in the first half of last month, and a 30% drop year on year.
Investors as polled by S&P Global Commodity had expected a 29.0m-tonne crush figure, representing a decline of a more modest 20%.
Yield improvement
Nonetheless, the data showed that while rains, short-term, slowed the harvest, there was increasing evidence of the cane crop recovering from the frost and drought damage which dogged early harvest results.
“Agricultural productivity in September went in the opposite direction” to the trend in cane harvest volumes, “and presents a strong advance in relation to that observed in the same period of last season”, Unica said.
Preliminary data from the CTC sugarcane technology centre “indicate that the increase occurred more intensely in the states of São Paulo and Minas Gerais”, the industry group added, although stopping short of giving any yield figures.
It also noted that 240 mills were still operating in the Centre South as of the start of this month, up from 222 last year, with 18 having closed for the season, which started in April.
Centre South cane mills typically shut down towards the end of the calendar year, as cane supplies run low and rains seasonally increase, although many are expected to stay open longer in 2022, after starting late to allow cane crops greater time to recover from their weather setbacks.
Full-season significance
The turn wetter in the Centre South, which has been welcomed by soybean growers undertaking early plantings, had already been identified as a setback to the region’s sugar production potential for 2022-23.
Marex earlier this week noted “increased expectations that the recent rains in Centre South Brazil would result in lower” sugar levels in cane, and a lower proportion of crop used to make the sweetener rather than ethanol.
This, factoring in early-season results too, “would mean that the remaining cane, even it is of better quality, will not pull up sugar production much above 32.0m-32.5m tonnes”.
Some analysts have published bigger forecasts, with Job Economia last month, for instance, pegging Centre South sugar output this season at 34.8m tonnes.
Raw sugar futures for March 2023 stood up 0.6% at 18.72 cents a pound in the aftermath of the data, close to the highest level in two months for a spot contract.
