June 9, 2015

Sugarcane Processing in Brazil could be impacted by Wet Weather

With the possibility for a strong El Nino developing in the Pacific Ocean, sugarcane processors in southern Brazil are worried that the increased rainfall associated with an El Nino could impact the 2015/16 sugarcane harvest in southern Brazil. A strong El Nino generally is associated with above normal rainfall in southern Brazil and below normal rainfall in northeastern Brazil. Heavier than normal rainfall can hamper mechanical sugarcane harvesting and result in lower sucrose content in the sugarcane.

Southern Brazil produces approximately 90% of Brazil's sugarcane crop and during the month of May, the rainfall in Sao Paulo, Parana, and Mato Grosso do Sul was 30% to 40% above average. According to meteorologists at Somar, the rainfall in southern Brazil is expected to remain above average for the next several months.

As a result of the wet weather, the Union of Sugarcane Industries (Unica) is reporting that the sugarcane processing during the first half of May was down 26% compared to a year earlier. Sugar production during the period fell 36% and ethanol production fell 22%.

A bigger problem may develop in September, October, and November when the summer rainy season starts in southern Brazil. In the past, strong El Ninos have been associated with heavy rainfall in southern Brazil during those months. If those rains develop, it could disrupt field activity at the end of the harvest season and force producers to leave some of the sugarcane in the field until the new harvest season which starts next April.

The industry in southern Brazil has the capacity to process 650 million tons of sugarcane per year, but some of that capacity has been closed down as mills shut their doors due to low profitability. Estimates are that 590 million tons of sugarcane will be processed in southern Brazil during the 2015/16 harvest season. If harvest delays occur, sugar production may be impacted more than ethanol because mill operators are shifting more of their production to ethanol due to six-year lows in sugar prices.