Sugar production in Brazil’s Centre South cane belt continues to be very brisk, thanks to dry weather, according to the country’s cane body, Unica.
Unica reported Centre South sugar production at 3.1m tonnes in the second half of July, up 9.5 per cent from the first half of the month, and up 10.6 per cent over the same time last year.
The rapid production is the result of drier weather, which has allowed the pace of cane cutting to increase, as well as mills increasingly favouring sugar production over ethanol, thanks to higher prices.
Centre-south mills crushed 49.08m tonnes of cane in the second half of July.
Both the sugar output and the rate of crushing were in line with market expectations, but they underline the strength of production from the world’s top sugar grower.
Centre south mills have crushed some 310m tonnes of cane so far this season, which began in April — 13 per cent ahead of last year’s pace.
And thanks to producers favouring sugar over ethanol, production of the sweetener is up 26 per cent year-on-year, at 16.9m tonnes.
High involvement by speculators
Writing ahead of the Unica data, (it was said) that the (accurate) analyst estimates were “high numbers” and warned that the data “may impact on a futures market already conscious of the very high involvement in the market by funds and speculators.”
According to the latest commitment of traders data from the Commodity Futures Trading Commission, speculators are holding a record long position in New York raw sugar futures.
Analysts are wary of this large fund long-position, as it leaves room for a rapid sell-off if, or when, the market loses momentum.
Sugar finds support
But raw sugar rallied, despite the bearish data, supported by an uptick in the Brazilian real, which discourages producer selling there, and encourages mills to favour ethanol.
The real suffered its biggest one-day loss in two months on Friday, after the acting-President, Michel Temer, signaled his commitment to “finding an equilibrium” in exchange rates.
The comments were seen as suggesting that the country’s central bank would continue to keep the brakes on currency’s recent rally, in order to protect local-currency receipts from commodity exports.
The real strengthened on Monday, on ideas that the Central Bank has only limited ability to effect such a slowdown.
Raw sugar in New York was up 1.8 per cent on the day in midday deals, at $20.06 a pound.