The latest data from Unica, the Brazilian sugarcane industry, shows that the crucial centre-south crop – which accounts for almost 90% of the country’s sugarcane output – is doing much better than expected earlier this season.

If it weren’t for exceptionally heavy floods across much of Thailand, international futures’ prices would much lower than the 26 cents/pound or so they are right now.

First to Brazil. Since 1 April this year and up to 16 October the cane crush has been 436.538 million tonnes, a bit more than 7% lower than for the same period of the 2010-2011 season. Total sugar production was 27.732 million tonnes, a negligible 3% lower year-on-year, and the average yield per tonne was 137.7 kilogrammes, just 2.66% down compared to last season. The bottom line is that while this season is not great, and is lower than last year, the 2011-2012 season is (so far) shaping up to be much better than those between 2007-2010, in terms of accumulated sugar production. The only question mark hanging over the amount of sugar available for export from Brazil is the sugar/ethanol ratio – currently that is running at almost 50:50. The inexorable growth in Brazil’s flex-fuel car fleet will continue to soak up a lot of ethanol.

The other major sugar producer (and potential exporter this season), India, is also doing comparatively well and ought to produce enough sugar during 2011-2012 to satisfy local needs, and have as much as 4 million tonnes available for export, if there is little or no stock rebuilding.

But the flooding in Thailand is becoming a serious threat, not so much to sugar production, but the financial and logistical support that’s needed for sugar exports. Out of 77 provinces, 62 have experienced floods. It’s the worst flooding the country has seen in 50 years and has dislocated around 2.5 million people. The governor of Bangkok said on Wednesday (26 October) that: “massive water is coming”. If the dykes that ring much of the city burst then many parts of Bangkok will be flooded, causing severe disruption. Previously we have expected Thailand to be able to export as much as 9 million tonnes from its 2011-2012 sugarcane harvest.

The seasonal cane crushing has been delayed until late November and, while the crush target of around 90 million tonnes is still achievable, inevitably there will be lengthy delays in getting the sugar out to market. But Thailand’s unfortunate floods are pretty much the only bullish factor around for sugar right now. They might help keep prices at or above 26 cents/pound – but longer-term the price ought to come down to the marginal cost of production of around 20-22 cents.

source: worldcrops

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