The sugar cane crop in Brazil’s Center South, the world’s largest producing region, may fall below 515 million metric tons in the 2011-12 season, according to Armajaro Trading Ltd.
Brazil’s industry group Unica estimated the crop at 533.5 million tons on July 13, and is scheduled to update the forecast at 6 p.m. London time. Sao Paulo-based consultancy Datagro expects a crop of 517.36 million tons, while Archer Consulting, also in Sao Paulo, says the consensus is 515 million tons.
“I would suspect 515 million tons is a more reasonable target at the moment, but I would not be at all surprised to see the crop fall further,” Guy Toller, sugar director at Armajaro Trading, the supplier of cocoa, coffee and sugar owned by Anthony Ward’s Armajaro Holdings Ltd., said in an interview on Aug. 8 at the company’s offices in London
Sugar climbed 13 percent in New York last month as Unica said the Center South sugar output would fall for the first time in six years. The price dropped 7.5 percent this month on speculation demand would begin to slow. Sugar fell to 26.38| cents a pound on Aug. 8, the lowest since July 1.
“The lower Brazil crop was fully priced in at 31 cents a pound, but now at about 26 cents a pound, I’m not sure,” Toller said in the interview.
The current surplus projections for the 2011-12 season are probably optimistic, Toller said. Rabobank International expects a surplus of 9.8 million tons in the period. Macquarie Group Ltd. says supplies will outpace demand by at least 5 million tons, while Czarnikow Sugar Futures Ltd. estimates supplies will exceed demand by 10.3 million tons.
“Most people are factoring in optimal crop expectations, and there isn’t very much slack in the numbers for any weather problems that may occur,” Toller said. “There is a forward surplus developing in the market, but the question is when it will be available for the market.”
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