June 26, 2012 / 5:51 PM / 7 years ago

UPDATE 2-Rain to push Brazil sugar output to later in year

* Rain will help boost cane crop later in year

* Mills were kept from harvesting by rains early in season

* Mills favoring sugar production this year (Adds further details on report)

SAO PAULO, June 26 (Reuters) - Widespread rain during the first few months of Brazil’s center-south sugarcane crush has slowed sugar and ethanol production and will push more of that output to the second half of the season, cane industry association Unica said on Tuesday.

Sugar output from the main center-south crush from April through mid-June fell 28 percent, compared with a year ago, to 4.89 million tonnes.

Production of ethanol over the same period fell 33 percent to 3.61 billion liters, Unica said in its biweekly crushing report.

Mills are allocating more of their cane to sugar production sweetener than a year ago. Since crushing started in April, 45.6 percent of all cane processed was used to make sugar compared with 43.9 percent last year.

Analysts estimate that production costs for sugar are at around 17-18 cents/lb. New York ICE futures prices tested support at 19 cents in early June and are now trading around 20.5 cents and the profit margins for most mills are better for sugar than ethanol.

Ethanol accounted for 54.4 percent of the crush through mid-June, down from 56.1 percent last year.

Brazil’s state-led oil company Petrobras raised the price of wholesale gasoline by 7.83 percent on Monday, the first hike since 2006.

This would have favored mills and the returns from ethanol sales were it not for the government’s decision to cut the so-called Cide tax to keep consumer prices at the pump unchanged. This in effect gives mills little room to raise their prices.

WEATHER

Local meteorologists Somar said Brazil’s cane belt would turn dry through mid-July at least as the region passes through the dry season. Even after that, showers would be light and sporadic.

The port of Santos, which ships the bulk of Brazil’s sugar to the world, may receive rain from passing cold fronts, which could delay loading bulk raws during the peak harvest period, Somar said.

Unica’s acting president and technical director Antonio de Padua Rodrigues said the above average rainfall in the first half of 2012 should improve agricultural yields, or tonnes of cane per hectare, of the crop that has yet to be harvested.

“But mills have not been able to crush as many days and the sucrose levels in the cane are lower,” he said. (Reporting by Reese Ewing and Peter Murphy; Editing by Bob Burgdorfer)

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