Raw sugar futures jump as Brazilian harvest worsens
Published: 09/21/2012, 8:31:52 AM
Brazilian sugar mills' effort to ramp up sugarcane processing won't yield more sugar, according to a closely watched forecast that sent prices for the sweetener higher, according to Dow Jones.
Raw sugar for October delivery on ICE Futures U.S. exchange rose 1.3% Thursday to 19.21 cents a pound, bucking the trend across most other agricultural markets that fell on a stronger U.S. dollar.
UNICA raised its forecast for the amount of sugarcane that mills in the main centre-south growing region would crush this year by 1.9% to 518.5 million metric tonnes of cane. Despite the forecast increase in raw material processed, the region will likely produce 32.7 million tonnes of sugar, a 1.2% drop from UNICA's forecast in April.
It is a sign the torrential rains in May and June that delayed the Brazilian harvest also reduced the sugar content in the cane.
"The increase in the crush was not enough to offset the decline in cane quality," UNICA's interim president, Antonneio de Padua Rodrigues, said Thursday.
Some analysts expect sugar production to be even less than what UNICA forecast.
"I'm not so optimistic," said Newedge analyst Alex Oliveira. "I'm expecting the yield of the cane to drop quite fast."
He said Brazil's centre-south region may produce as little as 31.5 million tonnes of sugar this year. That forecast would put it nearly on par with last year's harvest.
Brazil produces about one-fifth of the world's sugar, and prices have declined sharply in recent weeks on expectations mills would be able to make up for lost time by crushing more cane. The October futures contract dropped to a 25-month settlement low of 18.87 cents a pound Sept. 6.
But even smaller supply isn't expected to boost prices much because global demand isn't expected to jump.
"I don't see much demand," Oliveira said. "I don't think we're done with the sell side of the market."
In a report Thursday, Czarnikow, one of the U.K.'s oldest sugar tradehouses, raised its estimate for world sugar consumption in 2012/13 by 900,000 metric tonnes to 173 million tonnes, citing lower sugar prices and the rising cost of corn sweetener due to the U.S. drought.
"A production surplus--and lower prices--should encourage increased consumption," said Czarnikow director Toby Cohen. "But consumers may not respond as quickly as the market would like."

