Sugar prices weakened, after data from Brazilian cane group Unica showed slowing ethanol sales from cane mills.
Sugar prices spiked immediately after the data was announced, thanks to some mildly bullish headline numbers.
Sugar production in the key Centre-South region of Brazil was 704,000 tonnes, in the second half of November compared to 1.2m tonnes in the first half of November.
A survey by Platts pegged expectations for sugar production over the period 758,120 tonnes.
In line with expectations
The volume of cane crushed was broadly inline with Platts’ forecast at 18.7m tonnes, down from 25.6m tonnes in the first half of November.
The slow pace of the harvest is the result of heavy rains in the Centre-South region.
And the proportion of cane that was being diverted to sugar production was 33.1%, compared to 38.2% in early November, where the Platts survey had called for a 36.5% mix.
But the brief spike in prices was followed by a sharp sell-off.
Looking deeper
“The key driver behind the selloff was looking deeper into the numbers, and seeing the contraction in the sale of ethanol,” Tracey Allen, senior analyst at Rabobank, told Agrimoney.com.
Ethanol sales fell 8.0% in November, to 2.52 cubic metres, from 2.74m cubic metres in October.
Sales of hydrous ethanol in November were 1.57m cubic metres, down 15.6% from October levels.
“Hydrous ethanol sales really contracted,” said Ms Allen.
Gasoline boost
Sales are still well ahead of last year, when November saw total ethanol sales of 2.05m cubic metres, and hydrous ethanol sales of just 1.26m cubic metres.
Ethanol sales in Brazil rallied in October when the state-owned oil company Petrobras hiked gasoline prices, making the biofuel more competitive.
A stronger ethanol market encourages growers to divert production away from sugar, and so props up the sugar price.
Falling real
Ms Allen also noted that the release in Unica “coincided with the depreciation of the real,” which eased back against the dollar today.
The Brazilian real was down 1.3% against the dollar in afternoon deals.
A weaker real encourages exports, and also incentivises producers to favour sugar, which is mostly exported, compared to ethanol, which mostly goes for use in domestic road fuel.
But the drop in ethanol sales was the “driver of the selloff,” Ms Allen said.
March New York raw sugar futures were down 1.6% in afternoon deals, at 15.05 cents a pound.
