May 23, 2011

Sugarcane Production in Brazil to Increase 2.9% in 2011/12

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

Sugarcane production during the 2011/12 growing season in Brazil is expected to reach 642 million tons, which if realized would represent an increase of 2.9% compared to 2010/11. The increase is the result of newly planted sugarcane acreage, but the actual tonnage per hectare is expected to decline 1.8% according to Conab. They attribute the lower production to the extended dry season in 2010 that adversely affected the growth of the sugarcane crop.

The state of Sao Paulo continues to be the leading sugarcane producing state in Brazil with 4.46 million hectares under cultivation, which represents 53% of Brazil's total sugarcane acreage. In second place is Minas Gerais with 740,000 hectares followed by Goias, Parana, and Mato Grosso do Sul.

The total ethanol production in Brazil during the 2011/12 growing season is expected to be 25.5 billion liters or an increase of just 0.5% compared to last year. The Union of Sugarcane Industries (Unica), which represents the sugarcane industries of southeastern Brazil, is expecting the total sugarcane crop to increase 2% to 568.5 million tons. Sugar production is expected to increase more than ethanol production in 2011/12 due to strong international sugar prices.

Now that the sugarcane harvest has begun, ethanol supplies in Brazil are increasing and ethanol prices are declining. The average price of ethanol in Brazil at the pump is R$ 2.22 per liter or approximately US$ 5.27 per gallon. Retail prices for ethanol have been declining after reaching a peak in mid-April. The state of Sao Paulo has the lowest average ethanol price at R$ 1.95 per liter (US$ 4.63 per gallon) followed by Mato Grosso at R$ 2.04 per liter (US$ 4.84 per gallon). The retail price of E100 ethanol is expected to decline to a more normal range of R$ 1.60 to R$ 1.80 per liter over the next several weeks (US$ 3.80 to US$ 4.27 per gallon).

The state of Mato Grosso has a small but growing sugarcane crop. After a slow start to the harvest season, 90% of the sugar/ethanol mills in the state of Mato Grosso are now processing the new sugarcane crop. Ten of the 11 sugar/ethanol mills in the state are now working and the twelfth mill is scheduled to start processing sugarcane later this week.

In total, the sugar/ethanol mills in Mato Grosso are expected to process 14.2 million tons of sugarcane in 2011/12, which is 4% more than last year. Total ethanol production in the state is expected to increase 6% to 900 million liters. Of this total, 63% will be hydrous ethanol sold as E100 and 34% will be anhydrous ethanol sold as a 25% mixture in gasoline. Sugar production in the state is expected to decline by 4% as more emphasis is placed on producing ethanol.

The sugar/ethanol mills in Mato Grosso produce more ethanol than what is consumed in the state and the excess is exported to the neighboring states of Acre, Rondonia and Amazonia. In the case of sugar production, 60% is consumed within the state and the remainder is shipped to neighboring states.