A report released on Monday by broker and supply chain services firm Czarnikow said Brazilian sugar mills have hedged, by taking short positions on New York’s ICE exchange, just over 20 percent of their expected raw sugar sales. This is well below levels seen in previous years, with more than 40 percent hedged at the same time last year and nearly 70 percent two years ago.

Czarnikow senior sugar analyst Ana Zancaner said mills have shown little interest in fixing prices in recent months. She said pricing activity has been limited over the past two months because producers are unwilling to sell sugar at prices below their production costs.

Zancaner said the cost of producing sugar in Brazil’s center-south region is currently estimated at about 16.3 US cents per lb. By comparison, raw sugar futures in New York were trading at around 14.30 cents per lb late on Monday.

She also said sugar prices in Brazil, measured in reais per metric tonne, are near five-year lows at about 1,700 reais.

Zancaner said the outlook for Brazilian mills remains difficult, noting that shifting more production to ethanol offers limited relief. She said falling gasoline prices are limiting any increase in ethanol prices.

Czarnikow has lowered its estimate for the share of sugarcane that will be used to produce sugar to 48.3 percent, down from an earlier forecast of 50.5 percent. This change is expected to reduce sugar output in the center-south region by about 700,000 tonnes, bringing total production to 40 million tonnes.

At the same time, the broker raised its forecast for total sugarcane output to 621 million tonnes from 610 million tonnes, citing favourable weather conditions.