The Brazilian crop supply agency lifted its forecast for sugar production in the country’s cane belt by 2.32m tonnes, citing dry weather and the large amount of cane left over from last season.
Conab saw sugar output in the Centre South region at a record 36.55m tonnes for the current 2016-17 season.
This compares to a forecast of 34.23m tonnes made in April, at the start of the current season, and 30.88m tonnes produced in the 2015-16 crop year.
Conab forecast total Brazilian sugar production at 39.96m tonnes, up from 33.49m tonnes in the previous season.
This compares to a forecast of 37.07m tones from the US Department of Agriculture.
Cane crop to rise, but not as fast
Conab actually trimmed its idea of cane production in the country’s Centre South, down 5.1m tonnes from the April forecast, to 631.9m tonnes.
In Sao Paulo, the country’s top growing state, Conab noted “excellent weather conditions in recent months in contrast to the excessive rainfall during the last crop”.
Both factors are good for sugar production, Conab said.
“On one hand the good weather conditions help in the development of crops, on the other excessive rainfall last season prevented the harvest of sugarcane [meaning cane left over for harvest in this crop year].
But conditions elsewhere have been more mixed, including in the key cane belt state of Minas Gerais.
And sugar production is set to rise more sharply, due to mills increasingly favouring the sweetener over ethanol.
Prices in New York tumble
Sugar markets were down sharply on the day.
Selling accelerated as the Brazilian real continues to fall back from its 13-month high last week, which encourages producer selling.
The real is sinking as the Brazilian central bank sells the currency short in international markets, and the dollar gains on ideas that US interest rate hikes could be on their way as soon as next month.
But Nick Penney, at Sucden Financial, warned that “should rain re-appear in Centre South Brazil or should the crushing season come to an end sooner than expected, things could change rapidly”.
October raw sugar futures in New York were down 2.7% on the day, at 19.75 cents a bushel in mid-day deals.