Brazil's government on Tuesday reduced its forecast for the country's 2017/18 sugar cane crop to 635.59 million tonnes, a 3.3 percent fall from the prior cycle, citing a reduction in planted area in the world's largest producer. Despite good weather during the season, the reduction in area in key producing regions was the main factor for the estimated drop, food supply and statistics agency Conab said.

Sugar output, on the other hand, is expected to reach 39.46 million tonnes this season, a 0.2 percent rise from the previous cycle, as mills boost the amount of cane they earmark for producing the sweetener.

Conab forecast mills will dedicate 47.1 percent of the cane to sugar production, above the 45.9 percent of the prior cycle, with corresponding cuts in ethanol output. Conab now expects ethanol production to fall this season, to 27.1 billion liters, 2.7 percent below last season's level. However, as domestic gasoline prices have been rising, sales of hydrous ethanol, the type of fuel that can be used by Brazil's flex-engined cars, are going up. Reflecting this trend, Conab raised its total ethanol forecast from the August figure, when the estimate was 26.1 billion liters of production in Brazil.

Copyright Reuters, 2018