Nov. 15 (Bloomberg) -- Sugar-cane output in Brazil’s center south, the main growing region of the world’s biggest producer, will rise 6.7 percent in the season that starts there in April, according to Green Pool Commodity Specialists Pty.
Cane production in the area will total 557 million metric tons in 2013-14, the Brisbane, Australia-based researcher estimates. That compares with 522 million tons in the 2012-13 marketing year under way. Production in Brazil’s center south fell for the first time in a decade in 2011-12 to 493.3 million tons, according to data from industry group Unica.
“The crop has been given some renovation in the last year,” Tom McNeill, a director at the company who has worked in sugar for more than 25 years, said in a phone interview today.
Sugar production in the area will rise to 35 million tons from 32.4 million tons in 2012-13, the researcher estimates. Ethanol output will climb to 23.1 billion liters (6.1 billion gallons) in 2013-14 from 21.5 billion in the current season, McNeill estimated. Both the sweetener and the biofuel are made from raw material sugar cane in the South American nation.
“We don’t expect much change with respect to ethanol, so we’ve given quite a high sugar number,” he said.
Millers in the center south will direct 48.1 percent of all the cane processed to making sugar instead of ethanol, according to Green Pool. That’s little changed from 48.44 percent in 2012-13. Green Pool’s estimates allow for an increase in ethanol exports to the U.S. and assume that the Brazilian government will keep its biofuel policy unchanged.
“The Brazilian government would have to hike the price of gasoline for that to change and currently they are not showing indications that they want to do that,” McNeill said, referring to a possible higher allocation of cane to make the biofuel. “If they do, we will revisit those assumptions.”
The global sugar market may face a fourth year of surpluses because of rising output in Brazil, according to Green Pool. Prices have slipped 18 percent this year in New York as supplies outpaced demand. The surplus in 2012-13 will be 5.9 million tons, according to the International Sugar Organization in London.
“The difficulty for the world market is that we have the potential for a fourth year of surplus,” McNeill said. “Unless there are compensating production falls elsewhere it’s hard to see that we will be balanced or in a deficit.”
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