Brazil Dry Weather Compounds Outlook for Smaller Sugar Supplies

Dry weather is hurting sugar-cane crops in Brazil’s Center South, the main growing region, compounding damage from a drought in the first quarter, an industry researcher said.

Yields this season will drop to 71 metric tons of cane per hectare, compared with about 79 tons last year, Julio Maria Borges, the head of Sao Paulo-based Job Economia & Planejamento, said in a telephone interview.

In the past month, areas near Ribeirao Preto, Sao Paulo, in the heart of the cane belt, received as little as 25 percent of average rainfall, according to MDA Weather Services. Western Minas Gerais and southeast Goias state, have also been “very dry,” and the pattern is expected to extend in the next six to 10 days, said Donald Keeney, a meteorologist with the Gaithersburg, Maryland-based forecaster.

“There is no good news for the crop,” Borges said. “The cane condition is very poor, and the agricultural yield, or total cane, will probably be lower in the second half of the harvest” that started April 1, he said.

Raw sugar climbed about 14 percent this year on ICE Futures U.S. in New York, exceeding the 5.7 percent gain for the Standard & Poor’s GSCI Spot Index of 24 raw materials. The worst drought in 50 years hurt crops during the first quarter in Brazil, the world’s biggest grower and exporter. The recent dry spell is exacerbating damage at a time when an El Nino weather pattern threatens to reduce monsoon rainfall and crop output India, the second-largest producer.

Ethanol Blend

A lack of moisture will curb development of younger plantings, and means growers in the Center South will probably harvest less than 560 million tons, Michael McDougall, senior vice president at Newedge Group in New York, said in a telephone interview. That compares with almost 597 million last season, data from Sao Paulo-based industry group Unica show.

The prospect of reduced supplies come as the Brazilian government considers raising the amount of cane-based ethanol that goes into gasoline to 26 percent from 25 percent, newspaper O Estado de Sao Paulo reported June 18, without saying how it got the information. The projected increase would reduce production of sugar by as much as 600,000 tons as mills use more raw material to make the fuel, said Jeff Dobrydney, a vice president for JSG Commodities in South Norwalk, Connecticut.

Growers “did not replant as much as they expected because of the drought that hurt plantings in the first quarter,” McDougall of Newedge said.

To contact the reporter on this story: Marvin G. Perez in New York at mperez71@bloomberg.net

To contact the editors responsible for this story: Millie Munshi at mmunshi@bloomberg.net Patrick McKiernan

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