* Sugar undervalued, does not reflect weather risk
* Brazilian millers under pressure from slump in sugar price (Adds weather risk, Brazil, comments)
By Colin Packham
SYDNEY, April 23 (Reuters) - China’s sugar output in 2015/16 is expected to drop below the 10.5 million tonnes estimated for the current season, Wilmar International Ltd said, which could prompt buyers to ramp up imports of the sweetener to meet demand at home.
The country’s sugar crop is likely to be a bit lower next year compared to what should have been an improvement from one year to another, Jean-Luc Bohbot, group head of sugar at Wilmar, told Reuters in an interview on Thursday.
If the world’s top sugar importer buys more versus an estimated 4 million tonnes this season, it will give a much needed boost to sagging global benchmark prices, which according to Bohbot are currently undervalued.
Prices of the sweetener plumbed six-year lows last month amid ample world supplies, but Bohbot said he sees an upside from here given indications of inclement weather conditions.
The market has failed to take into account the threat from a possible emergence of a crop-damaging El Nino weather event and the potential for a Brazilian market collapse, Bohbot said. Brazil is the world’s top sugar producer and exporter.
“Today people are putting zero risk factor on weather risk, despite some signs of strange weather in some parts of the world, and underestimating the Brazilian situation,” he added.
Brazil has been able to boost exports due to the weakening Brazilian real, but with global sugar prices near multi-year lows, the country’s millers are now struggling to stay afloat and this could prompt a strong pullback in supply next season, Bohbot said.
“In Brazil, at least 30 percent of the industry is in a critical situation, where they have no cash to pay the bills and they certainly don’t pay the banks any more, close to what in America we would call a Chapter 11,” said Bohbot.
“Another 30 percent in Brazil is suffering a lot with difficulties to generate enough cash, and certainly not investing to maintain the asset or expand so a very small part of the industry in Brazil is okay.”
Bohbot also sees little attention being paid to the threat from El Nino.
The Australian Bureau of Meteorology has said there is at least a 70 percent chance of an El Nino arriving as early as June.
An El Nino would mean lower rainfall in Australia and Asia, and more rains in South America. Without just the right amount of moisture, sugar production would be curtailed in both regions, analysts said. (Editing by Himani Sarkar)