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Brazil’s sugar production forecast highest in three years
April 16, 2016
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SAO PAULO: Brazil’s government released its first official estimate of this season’s sugar cane crop, with mills expected to boost sugar output to 37.5 million tonnes from 33.5 million tonnes last season, while reducing their output of ethanol.

If confirmed, Brazil’s total sugar output would be the highest since the country put out 37.9 million during the 2013-14 (April-March) season, government crop supply agency Conab said.

In recent years, Brazil’s cane belt has been plagued by severe drought in the northeast, and hefty debts that have pushed cash-poor mills on to the more liquid, spot ethanol market. Mills need greater cash flow and credit to export sugar.

The agency, which is part of the Agriculture Ministry, said the area planted to cane grew 5.4 per cent to a record 9.07 million hectares due to the amount of cane left over from last season that mills were unable to harvest.

Mills were expected to make rapid progress in early crushing of the crop this season, helped by dry weather forecast by meteorologists for the coming months.

The shift in global weather patterns from El Nino, which tends to contribute to wetter conditions in Brazil’s main center-south cane belt, to the drier La Nina scenario will also bode well for mills to favour sugar production over ethanol.

Several weeks ago mills began crushing the main center-south cane crop, which is forecast by Conab at a record 637.7 million tonnes, up from 616.8 million tonnes last season.


By the end of March, 130 of the region’s 350-odd mills had started crushing, according to industry group Unica.

Meanwhile, the country’s ethanol output is expected to slip 0.4 per cent to 30.34 billion liters, Conab said, with center-south output of the biofuel also dropping 0.1 per cent to 28.43 billion liters.

Prices for ethanol recently plunged at the mill gate with the pickup in harvest of the new crop. Mills favor ethanol production at the start of the crushing season when sugar levels in the cane are lower.

The Brazilian real edged stronger on Thursday to an eight-month high, shaking off the effects of central bank intervention amid growing bets President Dilma Rousseff could soon be impeached, paving the way to a more market-friendly government.

The country’s central bank once again intervened heavily to try to weaken the currency by stepping up its dollar purchases in domestic futures markets, using instruments known as reverse currency swaps. That intervention drove the real sharply weaker early in the session, but the currency clawed its way back to end the session stronger on growing expectations that the lower house of Congress would vote on Sunday to impeach the leftist president. The bank bought $8 billion in swaps on Tuesday, $5.25 billion on Wednesday and $4 billion on Thursday.

Traders said those contracts were mostly acquired by companies seeking to exit bets on the real’s weakness and unwind currency hedging. Traders expect Rousseff’s ouster, if it materializes, could bring back trust in Latin America’s biggest economy, currently mired in its deepest recession on record.  Nearly all members of brazil’s largest political party in the lower house of Congress will back the impeachment campaign, a high-ranking party official said on Thursday. Hopes of political change lifted the benchmark Bovespa stock index to a ten-month high on Wednesday, but profit-taking weighed on the index on Thursday.

Other Latin American currencies strengthened after tame US price data reinforced expectations that the Federal Reserve will proceed cautiously in raising interest rates over the following months.

Retail sales in Brazil rose unexpectedly in February on strong demand for supermarket items and furniture, government data showed on Tuesday in a surprising sign of life from an economy mired in a deep recession for more than a year.


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