Brazil cut its forecast for sugar output, even as the country's top sugar and ethanol group stuck by its production forecasts, saying it had lost "only" 100,000 tonnes of cane to last month's surprise frost.
The official Conab crop bureau reduced by 2.6m tonnes to 40.97m tonnes its forecast for sugar output in Brazil, the top producer and exporter of the sweetener, limiting to 7.1% the rate of increase.
The downgrade reflected in part a reduction of 1.8m tonnes, to 652m tonnes, in the forecast for cane production, reflecting a lower expectation for the increase in area.
The estimate for the cane area harvested was reduced by nearly 100,000 hectares to 8.799m hectares - although that still represents a rise of 314,000 hectares on last year, with a small fall in the North East more than offset by an increase in area in the key Centre South district.
However, the main cause of the sugar output downgrade was an increase in the forecast for cane turned into ethanol instead, thanks to the more favourable returns to mills from producing the biofuel than the sweetener.
Ethanol output was pegged at 27.17bn litres, a rise of 1.4bn litres on the previous estimate, released in April, and up nearly 15% year on year.
The data tally with waning market expectations for the rise in Brazilian sugar production, with the influential Unica industry group also believed to be poised for a downgrade to its forecast.
While sugar prices have been depressed by expectations of a third successive world production surplus in 2013-14, leaving returns which agricultural trader Noble Group warned overnight were "marginal" even for efficient mills, ethanol production has been encouraged by Brazil government reforms.
Besides cutting taxes on ethanol output, the government earlier this year raised to 25%, from 20%, the level at which the biofuel must be mixed into commercial gasoline.
Wet conditions have also increased the appeal of ethanol to mills in altering the mix of sugars in cane away from sucrose, as required for crystallisation.
'Long pauses in harvesting'
However, Cosan, Brazil's biggest cane energy group, revealed that it was sticking by a forecast of 59,000-62,000 tonnes of sugar crushed in 2013, with 4.3m-4.6m tonnes of sugar sold and 2.1bn-2.3bn litres of ethanol.
Frosts in June, which Datagro warned had damaged some 18% of unharvested cane in the Centre South, had hurt "only" 100,000 tonnes of Cosan cane, the group said.
While it said that wet weather "prevented many mills to perform as initially expected", creating "long pauses in harvesting", its own cane division lifted the crush in the April-to-June quarter by 68% to 18.5m tonnes.
This rise reflected "the earlier beginning of the harvest compared last year" when, with the harvest falling well below crushing capacity, many producers left cane longer, to allow sugar concentrations to build.
However, while the sugar and ethanol division lifted quarterly earnings before interest, taxation, depreciation and amortisation (ebitda) by 30% to R$414m, the group fell to a R$198m loss for the quarter, hurt by the impact of a weak real on the group's dollar-denominated debt.
Cosan shares eased 0.1% to R$41.65 in morning deals in Sao Paulo.
In New York, raw sugar futures for October delivery were 0.1% higher at 16.80 cents a pound.
*Conab also on Thursday cut to 296.8m boxes, from 328m boxes, its forecast for the orange crop in Sao Paulo, the top citrus-growing state, of which 252.7m boxes are seen destined for making orange juice.