Tue Jun 10, 2014 12:02pm EDT

(Reuters) – Brazil’s main center-south cane crush is picking up speed as the harvest progresses, industry association Unica said on Tuesday, but it missed expectations in late May when rain slowed the pace of crushing.

Analysts at Agrilion said the overall cane crush of 37.98 million tonnes that Unica reported for late May was well below the 39 million to 41 million tonnes expected by the market, though it was above last year’s 35.54 million tonnes.


It is a critical time for the Brazilian cane crush after severe drought in January and February. Lower-than-expected sugar output from Brazil could reduce expectations of a fifth straight year of global oversupply.

Mills produced 2.03 million tonnes of sugar in the second half of May versus 1.91 million tonnes in the first half of the month, Unica said in its closely watched twice-monthly report.

Cumulative sugar output from the region was 3.57 percent less than it was at the same time a year earlier, at 5.44 million tonnes compared with 5.64 million tonnes.

Market estimates now put the center-south cane crop at around 575 million to 580 million tonnes, down from the 597 million tonnes crushed last season. In December, forecasts were as high as 620 million tonnes.

Aside from the recent rain, Unica said some mills were purposefully reducing the pace of crushing to avoid harvesting cane that was less than 12 months old, giving more time to recover from the drought. With less cane to crush this year, they can afford to wait longer.

ICE raw sugar futures rose slightly following the data, but the July contract was later down 0.05 percent at 16.93 cents a lb.

The current crushing season got off to a slow start after a severe January-February drought sapped nearly 5 percent from the expected cane crush in the 2014/2015 (April-March) season, and the sector suffers from widespread financial troubles.

By the end of May, 260 mills were operating in the center-south, down from 280 a year earlier, Unica said.

Mills have started to shift their cane processing to favor sugar production more in the past couple weeks, with mills allocating 43.8 percent to the sweetener in late May compared with 42.5 percent in early May. The remaining cane goes to produce ethanol biofuel in Brazil. (Reporting by Caroline Stauffer; Editing by Meredith Mazzilli and Leslie Adler)