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UPDATE 1-Brazilian mills cut sugar production, boost ethanol output

(Adds report details, Unica comment, table) SAO PAULO, Aug 28 (Reuters) - Brazilian mills reduced the amount of cane they use to produce sugar in the first half of August, increasing the use of the raw material for ethanol production as demand and prices for the biofuel improved, cane industry group Unica said on Monday. Mills in Brazil's center-south region, the country's main cane belt, earmarked 50.04 percent of cane in the first half of August to sugar production, the smallest share in the last two months. Unica said 40 percent of the plants able to produce both sugar and ethanol had shifted toward the biofuel early this month. "That is happening due to a more favorable arbitrage toward ethanol. It is normal that mills opt for the product that is giving them better returns," the group said in an email to Reuters after the release of biweekly crushing numbers. Brazil's center-south region produced 3.16 million tonnes of sugar in the first half of August, compared to 3.41 million tonnes in the previous two-week period. Mills crushed 45.29 million tonnes of cane in the period versus 50.74 million tonnes in late July. Ethanol production fell to 1.95 billion liters from 2.08 billion liters late in July. Unica said sales of hydrous ethanol, used by flex fuel vehicles popular in Brazil that can operate on gasoline or the biofeul, jumped 14 percent in the first half of August from the second half of July. Brazil's fuels market is demanding more of the product after a recent change on taxation increased ethanol's competitiveness against gasoline at the pumps. Despite that boost from ethanol, the production mix is still heavier on sugar this year compared to the last season, both for the first half of August and year-to-date figures. (Unica's full report: http://www.unicadata.com.br/listagem.php?idMn=63 )

See below detailed figures from Unica's crop report for the first half of August (cane and sugar in million tonnes, ethanol in billion liters, total recoverable sugar-TRS in kg per tonne):

BRAZIL'S CENTER-SOUTH - 1st HALF OF AUG (ANNUAL COMPARISON)

2016/17 2017/18 PCT CHANGE CANE CRUSH 45.13 45.29 0.34 SUGAR OUTPUT 2.97 3.16 6.02 ETHANOL OUTPUT 1.94 1.95 0.23 TRS (kg/T) 142.63 146.29 2.57 CANE TO SUGAR 48.57 pct 50.04 pct

CANE TO ETHANOL 51.43 pct 49.96 pct

BRAZIL'S CENTER-SOUTH CUMULATIVE DATA - 2016/17 VS 2017/18

2016/17 2017/18 PCT CHANGE CANE CRUSH 357.23 342.61 -4.09 SUGAR OUTPUT 19.95 20.72 3.86 ETHANOL OUTPUT 14.82 13.52 -8.79 TRS (kg/T) 129.20 130.43 0.96 CANE TO SUGAR 45.37 pct 48.67 pct

CANE TO ETHANOL 54.63 pct 51.33 pct Source: Cane industry group Unica

(Reporting by Marcelo Teixeira and José Roberto Gomes; Editing