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332497

UPDATE 2-Brazil's sugarcane season seen smallest since 2011 amid dryness, crop switch

(Adds historical comparison, market reaction)

By Roberto Samora and Marcelo Teixeira

SAO PAULO, Aug 19 (Reuters) - Brazil's government on Friday sharply cut its view for the sugarcane crop, projecting the smallest volume since 2011 amid unfavorable weather and a large reduction in planted area as farmers switch to more profitable crops such as soy and corn.

Government agency Conab said in its second projection for the 2022/23 season that it now expects sugarcane production of only 514 million tonnes in the main center-south (CS) sugar belt, compared with the 539 million tonnes it had projected in April.

The number is smaller than the 2021/22 crop which was impacted by the harshest drought in 90 years (525 million tonnes) and the smallest volume since center-south mills crushed 493 million tonnes in 2011.

The projection was surprising since most independent analysts still see Brazil's center-south crop at around 545 million to 560 million tonnes. Broker StoneX, for example, projected the CS cane crop at 557.5 million tonnes in July.

With the sharp cut in sugarcane volumes, the government's view for CS sugar output went down to 30.7 million tonnes, 5.7 million tonnes less than was seen in April and below the 32 million tonnes last year.

Conab said that along with drier-than-normal weather, a reduction in planted area is to blame for lower sugarcane production. It said cane fields fell 3.2% in CS, or a reduction of 240,000 hectares (593,052 acres). Farmers are mostly switching to corn and soybeans, even in the main sugar producing state of Sao Paulo.

CS cane-based ethanol production was seen at 23.48 billion liters from 24.26 billion liters last season. Corn-based ethanol production is seen growing to 4.52 billion liters from 3.47 billion liters.

Overall for Brazil, including data from north/northeast, Conab sees a total cane crop of 572.9 million tonnes and sugar production at 33.89 million tonnes, 3% less than 2021/22.

If confirmed, Brazil would fall to the No. 2 sugar producer in the world, behind India. (Reporting by Roberto Samora and Marcelo Teixeira; additional reporting by Gabriel Araujo; Editing by Steven Grattan, Chris Reese and Marguerita Choy)

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