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Sugar mills in Brazil likely to allocate low sugarcane for sugar production in the 2019/20 crop due to low sugar prices. It is expected that they will divert more sugarcane towards ethanol output because of strong local demand for the biofuel.
Canaplan consultancy’s chief analyst Caio Carvalho while speaking at a sugar conference in Piracicaba said that he had revised lower his April view of a 38 per cent cane allocation to sugar to a range of between 34 per cent and 34.5 per cent.
“Considering what we have seen in the fields so far, we changed our view for the production mix. Back in April, we expected mills would produce more sugar in the new season”, Caio Carvalho further added.
Sugar production in the country is also likely to fall from expected production as mills are likely to allocate less cane for sugar.
The excess production of sugar kept the prices low, and the mills turned back to their favourite ethanol production as the gasoline prices have increased.
This strategy of switchover makes Brazilian mills key swing factor in sugar markets.