Conab and Unica with different views on Brazilian sugar production

The raw sugar price is still hovering close to the seven-year low it hit last Monday, closing yesterday at 10.63 US cents per pound in the contract with an October maturity date. The latest estimate from the Brazilian forecasting agency Conab is also more likely to lend support to the bears, as it confirms the agency's more optimistic view of the ongoing harvest as compared to that of Unica, the Brazilian Sugarcane Industry Association.

Conab expects 594 million tons of sugar cane to be harvested in the main Center South growing region in 2015/16, 3.2% more than last season. Of this total, 43.6% - somewhat more than in the previous season, looks set to be turned into sugar, yielding 33.7 million tons of sugar. 

Although Unica's estimate of the sugar cane crop is only marginally lower than Conab's, at 590 million tons, the Association expects the proportion of sugar to decrease and sugar production to total 31.8 million tons, which is slightly less than in the previous season. 

As a matter of fact, from the start of the season in April until 1 August, nearly 11% less sugar was produced than in the same period last year, despite a comparable sugar cane crop. In the second half of July, however, dry weather conditions meant that more sugar cane was processed than ever before in a two-week period, allowing sugar production to increase significantly as compared with the same period last year. 

"The main harvesting period continues until mid-September. Due to the El Niño weather phenomenon, heavy rainfall from the end of August is again expected to hamper harvesting, which could then see the pressure on the sugar price abate", says Commerzbank.