August 2, 2018 / 2:09 PM / 3 months ago

Brazil sugar output seen even smaller next year as crop shrinks

ARAÇATUBA, Brazil, Aug 2 (Reuters) - Brazil’s center-south is likely to produce an even smaller amount of sugar next year after a sharp drop reported in the current crop, as a harsh drought and reduced crop care will lead to a poor cane harvest, according to industry representatives.

The world’s largest sugar producing region is expected by most analysts to cut output in the current crop, which runs from April 2018 to March 2019, to around 28 million tonnes from 36 million tonnes in the previous crop as cane volumes fall and mills prioritize ethanol production at the expense of sugar due to better returns for the biofuel.

“It is hard to believe, but we see an even smaller cane crop next year,” said Dib Nunes Jr, a director at consulting firm Dr. Cana.

Analysts project the ongoing center-south cane crop to fall to 560-570 million tonnes from 596 million tonnes last year, as most fields have not had widespread rains for more than two months.

If next year’s crop shrinks, it would be the fourth consecutive reduction since the record 617 million tonnes of cane in 2015/16. With less cane and the focus on ethanol, sugar output would decrease again.

“Most mills are short of money, they are cutting investment in plants and cane fields to pay bills,” Nunes said.

He expects around 11 percent of fields to be renovated this year, lower than an ideal level of 17 to 18 percent, which will lead to older cane fields that tend to produce less.

Marcos Tulio Bullio, a cane industry consultant at MTB Consultoria Empresarial, agrees that crop care is going to be weak this year.

“They will be happy if they at least manage to apply herbicides, forget about other things,” he said. Weed killers are key for cane plantations, to avoid weeds that ‘steal’ nutrients from cane.

The consultants talked to Reuters on the sidelines of the National Bioenergy Congress, a two-day event organized by industry group UDOP in Araçatuba, Sao Paulo state.

Even with poor crop care, there is a possibility for a larger cane crop next season if it rains a lot in the Brazilian summer from December to March, sugar and ethanol broker and analyst Tarcilo Rodrigues said.

Celso Jungueira Franco, owner of the Santa Adélia mill, disagrees.

“We haven’t seen a drop in the Araçatuba region for almost 90 days. Mills aborted planting plans due to poor soil moisture. Even if it rains a lot, that will not compensate,” he said. (Reporting by Marcelo Teixeira Editing by Susan Thomas)

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