by Agrimoney.comSugar prices retreat despite fears for Brazil cane
Sugar prices lost early gains despite growing fears for cane production in Brazil’s key Centre South region, as Kingsman cut its crop estimate hours after a lowball figure from US officials, while Canaplan put a decline in production on the cards.Kingsman, the Swiss-based consultancy, cut by 10m tonnes to 510m tonnes its forecast for the crop in the Centre South, which is responsible for nearly 90% of sugar output in Brazil, the top producer and exporter.
“The main reason is the lack of rain since February that has damaged the development of cane in the region,” Kingsman analyst Patricia Luis-Manso told Agrimoney.com.
The group added in a report that “cane buds are thinner and smaller than average, which will affect productivity”.
‘Not pleased with the development’
The forecast came hours after US Department of Agriculture foreign staff pegged the Centre South cane crop at 500m tonnes, “due to expected low agricultural yields as a result of the ageing of the sugarcane fields and below-average rainfall during the January-to-March period”.
And, on Thursday, Brazil-based Canaplan pegged the region’s cane crush at 460m-480m tonnes – implying a decline from last year’s 493m-tonne result.
This would represent a second successive season of decline in the cane harvest after more than a decade of uninterruted growth.
The 2011-12 drop, which thwarted a widely-predicted correction in sugar prices, was blamed on the impact of poor weather on cane which, thanks to low levels of investment by debt-burdened mills, has an age profile far older than the ideal.
“It is an estimate that will tend toward a lower estimate, because we are not pleased with the development of the crop,” Luiz Carlos Correa Carvalho, Canaplan’s senior analyst, said, according to the Agencia Estado newswire.
Canaplan estimates that 87% of first-cut cane, and all but 3% of second-cut cane, has suffered from drought over the past year.
And it forecast a drop to 30.1m-30.5m tonnes in Centre South sugar output, from 31.3m tonnes in 2011-12.
Too early to be sure?
The Canaplan estimate for sugar output is below a 33m-tonne forecast from the USDA bureau, while Kingsman kept its figure at 32.8m tonnes.
Ms Luis-Manso told Agrimoney.com: “We revised up our estimate for ATR” – the level of sugar refined from cane.
Nonetheless, while the cane estimates – which compare with a 509m-tonne projection last week from industry group Unica, and a 532m-tonne forecast by Brazilian officials – initially fostered a rebound in sugar futures, prices faded in afternoon deals.
“It may be that the market mistrusts Canaplan, given the very low and wide-of-the-mark estimates given last year,” Nick Penney at Sucden Financial said.
“Or it may be simply that the market is shrugging off these very early estimates, mindful that weather patterns and the age of the crop prevent anyone from being very certain on final outurn at the beginning of the crush season.”
‘Heavily buffered’
Furthermore, the market is this year “far more aware of crop progress in other producing countries, especially in Thailand, India and Russia”, Mr Penney said.
“The impact of a bullish number on Brazil may have been heavily buffered by these other considerations.”
Raw sugar for May stood at 21.99 cents a pound in late morning deals in New York, down 0.3% on the day.
The better-traded July lot was 0.9% down at 21.77 cents a pound.
