Brazil sugarcane crop may not reach forecast

By Paul Kiernan

--Brazil 1H-May Center-South Sugarcane Crush -6.7% On Yr At 32.8M Tons

--Brazil 1H-May Center-South Sugar Output -17% On Yr At 1.55M Tons

--Brazil 1H-May Center-South Ethanol Output -13% On Year At 1.26M Liters

SAO PAULO (MarketWatch) -- Faced with aging sugarcane fields and a slow start to the harvest, Brazil's 2011-12 cane crush may fall short of industry forecasts, an official at the Sugarcane Industries Association, or Unica, said.

Sugar mills in Brazil's key center-south region picked up the pace of sugarcane crushing in the first half of May compared with the previous two weeks, Unica said in a press release. Mills crushed 32.8 million metric tons of cane in the first half of May, up from 23.7 million tons in the previous two weeks but down 6.7% from a year earlier.

The cane's productivity fell, too.

Sugar output in the first half of May tumbled 17% on the year to 1.55 million tons. Production of ethanol biofuel sold at Brazilian gasoline pumps slid 13% to 1.26 million liters.

"Besides the poor quality of the raw material and the slow pace of crushing at the beginning of this crop, we're observing a significant reduction in productivity," said Antonio De Padua Rodrigues, Unica's technical director, in the press release. If the scenario doesn't change in coming months, "we might not reach the projected production for the crop."

Published in March, just before harvesting began, Unica's official forecast for the 2011-12 sugarcane crop is 568.5 million tons, up 2.1% from the 2010-11 crop.

But crushing in the center-south region, which produces some 90% of Brazilian sugarcane, fell 60% in the second half of April from a year earlier, leading sugar prices to rebound and some market participants to second-guess Unica's forecast. Contributing to the plunge was a strong statistical base of comparison, as crushing data at the start of the 2010-11 crop were unusually high.

"This year, the scenario is the opposite, as 60 mills weren't operating as of May 15, reflecting the low availability of cane," Unica said.

So far, the 2011-12 crop has yielded 56.7 million tons of sugarcane, 40% less than a year earlier. Sugar production has fallen 47% to 2.36 million tons, while ethanol output was down 42% at 2.16 million liters.

Unica's data showed mills continuing to favor ethanol production over sugar, possibly in response to high fuel prices in recent months. Of the cane crushed during the period, 57% was processed into biofuel and 43% into sweetener.

Members of Unica crush about 50% of Brazil's sugarcane.

source: marketwatch