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Brazil sugar output, cane crop seen falling next season due to dry weather

Credit: REUTERS/MARCELO TEXEIRA

Adverse climate conditions in most of Brazil in recent months will hurt sugar cane development and lead to a smaller crush and sugar production in the new season next year, sugar and ethanol consultancy Datagro projected on Tuesday.

By Marcelo Teixeira

NEW YORK, Oct 27 (Reuters) - Adverse climate conditions in most of Brazil in recent months will hurt sugar cane development and lead to a smaller crush and sugar production in the new season next year, sugar and ethanol consultancy Datagro projected on Tuesday.

Datagro's chief analyst Plinio Nastari said he expects the center-south cane crop to reach 575 million tonnes in the April 2021 to March 2022 season compared to 596 million tonnes in the current crop.

The excessive dryness seen between July and September reduced cane plantings and crop care, which will lead to lower agricultural yields next year.

Mills in Brazil's center-south region are expected to produce 36 million tonnes of sugar in the 2021-22 season versus 38 million tonnes for the current crop, Nastari said during a presentation at Datagro's International Sugar and Ethanol Conference.

"Mills would probably have to postpone the crushing kick-off next year to allow more time for the cane to recover," Nastari said, citing another expected result of the unfavorable weather in Brazil this year.

The small production fall should not however prevent mills from having a positive year next season, as both sugar and ethanol prices in local currency are near record levels.

"The Brazilian sugar sector went to hell with the coronavirus pandemic, but after June it left hell straight for paradise," Nastari said, referring to the sharp recovery in benchmark New York futures that is allowing mills to hedge large volumes of future production at good profit margins.

The analyst thinks mills in the world's largest sugar producer will have three consecutive years of good revenues considering current indicators.

Datagro projected smaller ethanol production again in Brazil next season after the fall seen in the current crop, as mills should continue to prioritize sugar over the biofuel.

It sees 2021-22 ethanol output falling 2.4% to 28.85 billion liters.

(Reporting by Marcelo Teixeira; Editing by Jan Harvey)

((marcelo.teixeira@tr.com; +1 332 220 8062; Reuters Messaging: marcelo.teixeira.thomsonreuters.com@reuters.net - https://twitter.com/tx_marcelo))

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