January 18, 2012

Unica Sets Goal of Doubling Brazil Sugarcane Production by 2020

Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.

The Union of Sugarcane Industries in Brazil (Unica) launched a new nationwide campaign in December called Moving More Ethanol (Movimento mais ethanol). The goal of the program is to reverse the recent downward trend in Brazilian sugarcane production and to reinvigorate and grow the sector to meet the huge increase in ethanol demand expected over the next decade.

The goal of the program is by the year 2020 to increase the production of sugarcane in Brazil to 1.2 billion tons per year, which would be over twice the present day production of 560 million tons. During the same period, sugar production is expected to increase to 51 million tons and ethanol production is expected to rise to 69 billion liters which includes both anhydrous ethanol to blend with gasoline and hydrous ethanol to sell as E100. An additional goal of the program is to increase the amount of electricity co-generated at the country's sugar mills to equal that of a large hydroelectric power plant.

These are very ambitious goals given the fact that the industry has been in the doldrums since the financial crisis of 2008. Over the last decade, the production of sugarcane in southern Brazil increased due to investments in new sugarcane plantings, improved cultural practices, building of new sugar/ethanol mills and expansion of existing mills. After the financial crisis of 2008, the expansion started to slow down and now in 2011/12, the sugarcane production actually declined. Instead of building new sugar/ethanol mills, many companies are now concentrated on purchasing older mills that are in financial trouble.

Adverse weather over the last few years had also contributed to the decline in production as well as ageing sugarcane fields and increasing production and processing costs.

Brazil has in place many of the factors that could lead to increasing sugarcane production including: abundant land resources (sugarcane only occupies 3% of Brazil's arable land), favorable climate and soils, highly evolved technology, modern equipment, and abundant and cheap labor. In addition to increased acreage, the yield per hectare is also expected to increase significantly over the next decade. Currently, the nationwide yield in Brazil is approximately 7,000 liters of ethanol per hectare and that is expected to increase to 12,000 liters per hectare by 2020.

When the 2012/13 sugarcane harvest gets under way in Sao Paulo in April, 63% of the sugarcane in the state will be harvested mechanically eliminating the need to burn the fields before harvesting to remove the dry leaves. Burning of the sugarcane fields in the past was a major source of air pollution and carbon emissions. Eliminating the need to burn the fields will help Brazil meet its goal of reduced carbon emissions.