Brazil Ethanol Boom Pushes Sugar Outlook to 14-Year Low

August 29, 2019
Isis Almeida and Fabiana Batista (Bloomberg) |

As Brazilian millers turn to ethanol, sugar production in the nation’s main growing region is now forecast to fall to a 14-year low.

That’s according to influential industry group Unica, which expects sugar output in the center south to fall by 5.7% year-on-year to 25 million metric tons, the lowest since 2005-06, according to people familiar with the matter, who asked not to be identified because the information is private. The group plans to present the new forecast to a government committee that monitors ethanol supplies.

Brazilian millers have focused on producing the biofuel after bumper crops from Thailand to India left the global market oversupplied, sending prices tumbling. Raw sugar futures traded in New York have lost about 50% from a 2016 peak, causing pain for producers contending with a surplus and subsidies that have helped Indian millers export more of their output.

The figures give traders the first insight into the thinking of the industry group, which hasn’t publicly made any forecasts for the season, choosing only to update the government on its estimates.

Sao Paulo-based Unica declined to comment when contacted by Bloomberg.

Millers will crush 578 million tons of cane this season, about 1% higher than last year, the people said. That will come as a surprise for some traders, as Green Pool Commodity Specialists said last week that cane estimates seemed to be rising to 580 million to 590 million tons. The Brisbane, Australia-based researcher is currently forecasting 581 million tons.

The sugar content in the cane is expected to drop 3.2% from a year earlier, according to the Unica forecast.

For its estimate, Unica considered crushing, output and yields published through the first half of August, the people said.