– Output from the world\’s biggest sugar producer Brazil is likely to disappoint again next season, putting a potential floor under global sugar prices that have been falling over the past three months.
Even with investments in cane replanting and good weather in the coming months, Brazil\’s main center-south sugarcane region will not recover to its high-water mark of 2010/11 when mills crushed a record 557 million tonnes.
After rains, drought and frost at the wrong times over the past year and a half, as well as lagging investments in replanting aging cane stockover the past several years, the center-south will post its first drop in output in 11 years.
Respected sugar and ethanol analysts Datagro said the current 2011/12 crop would finish in the coming weeks at 490.4 million tonnes, down 12 percent from a year ago. The world\’s largest sugar exporter Cosan put the crop at 485 million tonnes.
But the next crop will not likely show much of an improvement, if any, said some of the world\’s leading sugar analysts at the opening event of Brazil\’s Sugar Week that brings hundreds of industry leaders from around the world to Sao Paulo.
\”It (next season) will be a transition season, with a more substantial growth only in 2013/14,\” Datagro President Plinio Nastari said, adding that forecasts of 550 million tonnes next crop \”are unlikely.\”
Nastari sees the 2012/13 crop range between 460 million and 515 milliontonnes, \”similar to this one due to limited planting, increased diseases and pests among the aging crop.\”
Jonathan Kingsman, managing director of Lausanne-based consultancy Kingsman, put the next center-south crop at 515 million tonnes.
Sugar futures prices have been sliding over the past few months, along with other commodities amid the growing uncertainty of the worsening European and U.S. debt crises.
Charles Funnell, a soft commodities trader with Zug, Switzerland-based Aisling Analytics, said there was room for prices to fall even further amid the current global instability.
But he doubted that prices, now just under 24 cents a lb would fall as far as 15 cents over the next year.
But with Brazil\’s center-south cane industry of 320-odd mills geared to crush around 620 million tonnes of cane a year, sugar and production costs are expected to remain high, at around 18-20 cents a pound here, Kingsman estimated.
Brazil is typically the world\’s lowest cost producer of sugar, dominating around half of the global trade in the sweetener.
The rise in production costs in Brazil has opened the door for otherwise marginal sugar producers to be competitive on a global level and is reviving the global beat sugar industry, Kingsman said.