September 6, 2017 / 5:54 PM / 10 months ago

Unusually dry weather likely to hurt Brazil cane through 2018: Unica

SAO PAULO (Reuters) - Unusually dry weather in Brazil’s center-south sugar-producing region is likely to cut the total cane output per hectare for the rest of 2017 and in 2018, the technical director of industry group Unica told Reuters.

Antonio de Padua Rodrigues said in an interview late on Tuesday that above-average rainfall in April and May had initially fostered a positive view for 2017.

But he said expectations were now less upbeat due to about 70 rainless days, between early June to mid-August, in regions of the main cane-growing state of Sao Paulo.

“We still have the last third of the crop to be processed, and that share should have far worse yields than the cane harvested so far,” Rodrigues said.

From April to mid-August, Brazil’s center-south processed 343 million tonnes of cane in a crop projected by Unica to reach 585 million tonnes in 2017.

Last year, the region, which produces about 90 percent of Brazil’s sugar, handled 607 million tonnes of cane.

Although sugar content in cane increases with dry weather, that is unlikely to compensate for large losses in cane weight per hectare, as agricultural yields are measured.

“It remains very dry. Cane fields planted in July and August received little water. It is going to have an impact next year,” he said.

According to Thomson Reuters Agriculture Weather Dashboard, weather in Sao Paulo state will remain dry at least until Sept. 20, when some rainfall is expected there.

Researchers at Sao Paulo-based Banco Pine recently flagged the risk of falling cane volumes for the rest of 2017, citing an above-average number of rainless days in recent months in key Sao Paulo regions like Ribeirão Preto.

Consultancy and broker INTL FCStone on Tuesday cut its forecast for this year’s center-south cane crop to 584.3 million tonnes from 588 million tonnes due to the abnormally dry weather.

While the Unica technical director did not provide yield forecasts, INTL FCStone trimmed it to 74.7 tonnes of cane per hectare for 2017 from an earlier projection of 75.2 tonnes per hectare.

Unica’s Rodrigues added that sugar mills in Brazil are adjusting their production mix toward more ethanol and less sugar, since hydrous ethanol sales in the country picked up in the last month and should get another boost from Hurricane Harvey.

Petroleo Brasileiro SA, Brazil’s sole oil refiner, raised gasoline prices by 10 percent in September after global benchmarks for the fuel jumped due to Harvey, which had shut a range of refineries on the U.S. Gulf Coast.

The move increased gasoline’s price differential over cheaper ethanol.

The margin between the two products had already been widened at the pump by a Brazilian tax increase in July that was higher for gasoline than for ethanol.

Reporting by Marcelo Teixeira; Editing by W Simon

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