Output Revision, Ethanol Outlook Taking Prices Higher
BMI View: We have revised down slightly our forecast for Brazilian sugar production in 2013/14 in line with the latest changes to the country's sugar association's estimates. We caution that the amount of sugar crushed this season will depend on the pace of the crushing rather than the agricultural productivity of the crop. The higher percentage of cane diverted to ethanol at the expense of sugar will limit production growth this season, helping sugar prices higher in the near term. Still, we expect strong sugar and ethanol exports, which will prevent prices from returning to previous highs.
We have revised down slightly our forecast for Brazilian sugar production in 2013/14 in line with the latest estimates from the country's sugar association, UNICA. We now forecast production of 38.0mn tonnes (compared with 39.7mn tonnes previously), a small decrease from 2012/13's output. Frosts and the rainy weather in May and June led to reduced sugar levels; this, combined with the more widespread use of mechanised harvesting, delayed sugar crushing. The country's sugar crop also was affected by pest infestations (primarily broca, or cane borers, and leafhopper), which contributed to lower cane quality in some areas.
We highlight that the amount of sugar crushed this season will depend on the pace of the crushing rather than the agricultural productivity of the crop. UNICA has indicated that agricultural productivity in the harvested area of the Centre South region was up by 10.3% year-on-year since the start of the season, averaging 83.7tonnes/ha this year compared with 75.9 tonnes/ha in 2012/2013. Nevertheless, the volume of cane that will be crushed in the coming months will depend almost entirely on the pace of the harvest, which will be subject to weather conditions. According to UNICA, given that the amount of cane available for harvesting is slightly above 600mn tonnes in total, Brazil will be able to crush about 587mn tonnes of cane if weather conditions remain dry, while a maximum of 580mn tonnes of cane will be crushed if heavy rains start again.
|Brazil - Sugar ('000 tonnes) & Ethanol Production (mn litres), LHS & Cane Diverted To Sugar (%)|