UPDATE 1-Brazil's GVO starts sugarcane harvest early, cites El Niño

Fri Mar 28, 2014 1:30pm EDT

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(Adds quotes from director, details on crop)

By Fabiola Gomes

SAO PAULO, March 28 (Reuters) - Brazilian sugar and ethanol milling group Grupo Virgolino de Oliveira started harvesting cane early this season on concerns that El Niño rains may slow fieldwork later in the year, a director said on Friday.

GVO is one of the largest of the 28 sugar and ethanol producing groups that make up Copersucar, which on Thursday said it would form a 50-50 joint venture with U.S.-based Cargill to form the world's No. 1 sugar trader.

"We're already crushing, getting a jump on El Niño," GVO Director Carmem Aparecida Ruete de Oliveira said.

Recent climate models showed El Niño might cause new problems for Brazil's drought-damaged sugarcane crop if the weather phenomenon materializes later this year.

Oliveira said GVO's four mills had started limited harvesting in the second half of March and would slowly step up crushing in the coming weeks.

He declined to comment on the joint venture with Cargill.

Despite the expected drop in cane output in Brazil's main center-south crop due to the January-February drought, the sugar and ethanol industry still expects a fairly large harvest of 570 million to 595 million tons, according to market estimates.

Last season, mills crushed a crop of 596 million tons.

When weather is particularly rainy during Brazil's April-October dry season, mills can lose critical days needed to harvest and process the entire cane crop. This causes mature cane to be left in the field until next season, reducing sugar and ethanol output and raising costs for mills.

"We need to hope for a dry season," said Oliveira.

GVO initially expected to harvest 12.2 million tons of cane this year before drought took a toll on the group's crop. It now expects a crush of nearly 11 million tons.

Oliveira said some mills in the same region where his company operates were reporting crop losses of 15 percent.

"We are seeing losses because many mills with financial problems have not been able to treat their cane fields right and are leaving older cane fields" too long without replanting them, he said. (Writing by Reese Ewing; Editing by Franklin Paul and Lisa Von Ahn)

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