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Sugar production in Brazil’s Center South, the largest producing region, is poised to drop 3.2 percent this year after drought ravaged cane crops.

Output may decline to 33.2 million metric tons in the season that began April 1, from 34.3 million a year earlier, according to seven estimates from traders and analysts compiled by Bloomberg. The slump will mean global sugar production trails demand by as much as 3 million tons, according to Luis Roberto Pogetti, chairman of Sao Paulo-based Copersucar SA.

Futures climbed 11 percent to 18.25 cents a pound this year in New York. The worst drought in decades during the first quarter eroded crop quality and threatens yields in Brazil, the world’s top producer and exporter. Investors are betting the rally will continue, increasing their wagers on higher prices by more than fivefold since February, U.S. government data show.

“The rally will probably extend to 23 cents by July,” Julio Llorente, the commercial director at Sucre, a trader in Sao Paulo said in an interview. The threat of an El Nino weather pattern may “add to the losses from the drought,” he said.

El Nino can roil agricultural markets worldwide as farmers in South America contend with too much rain, while those in parts of Asia and Australia struggle with drier-than-normal weather. About a 20 percent probability of a strong El Nino is reflected in soft-commodity markets, compared with the 60 percent to 70 percent odds seen by meteorologists, analysts led by Ephrem Ravi, an analyst at Barclays Plc. wrote in report May 8.

Paulo Roberto Souza, the president and chief executive officer of Copersucar, also expects that that the arrival of El Nino would spur more crop losses. Prices will also rally as more of the cane crop is used to make ethanol, rather than sweetener, pushing futures above 20 cents, he said.

- Luzi Ann Javier in New York at Bloomberg.