Sugar prices continue to be unable to hold the 28-cents-per-pound level, but were able to stage a small bounce this morning, rising for the first time in four sessions, as Unica, a producers group, reduced its production forecast for Brazilian sugar.
 
Unica expects the centre-south region of Brazil to produce 488.5 million metric tons of sugar during the 2011-12 growing year, a smaller output level than the previous expectation of 510.2 million tons. Prices in sugar have slipped back since mid-October, as the eurozone crisis continues to work its malign influence on global risk appetite. Prices might continue to find some support in the medium term if the key centre-south region fails to see a rebound in output.
 
The region produces around 90% of Brazil’s sugar, and sugar industry consultants expect output to remain depressed for three to four years. An absence of investment in the Brazilian sugar industry has left it with large stocks of ageing and less productive cane sugar, after mills that had borrowed heavily were hit hard by the credit crunch of 2008-09. As long as the eurozone crisis continues to rumble on, then risk appetite will remain firmly muted, and traders will be waiting to see if any real good news will emerge from the G20 summit currently taking place at Cannes.