October 14, 2011

Mills Closing Early in Sao Paulo due to Lack of Sugarcane

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

The Union of Sugarcane Industries (Unica) indicated in their latest report that in southern Brazil between April 1st and October 1st, there have been 412 million tons of sugarcane processed, which is 7.4% less than during the same period in 2010. Sugarcane processing has actually increased during the month of September and especially during the second half of the month when 36 million tons were processed, which is 34% greater than the same time last year. This increase in sugarcane processing though is not expected to last as many sugar/ethanol mills in southern Brazil start to close down for the season.

In the state of Sao Paulo there are 20 sugar/ethanol mills that have already closed for season due to a lack of sugarcane to process. These closures are coming 1-2 months earlier than normal. The lack of sugarcane is the result of poor weather over the last few years and the advanced age of many of the sugarcane fields in Sao Paulo. As a result, the productivity of the sugarcane in southern Brazil has been very disappointing. Thus far this harvest season, the sugarcane yields in southern Brazil are running 18% below a year earlier.

In addition to lower tonnage, the sugarcane that is being harvested this year in southern Brazil is also of lower quality. Thus far this harvest season, the Total Recoverable Sugars are averaging 136 kilograms per ton compared to 141 kilograms per ton in 2010.

Mill operators have also opted to increase the amount of sugarcane used to produce sugar as compared to ethanol. In 2011/12, 51.5% of the sugarcane has been processed into sugar and 48.5% has gone into the production of ethanol. During last year's harvest, 54.7% was processed into sugar and 45.2% was processed into ethanol. Mill operators opted for increased sugar production due to strong sugar prices and high demand for the product. The sugar/ethanol mills in southern Brazil have produced 25.9 million tons of sugar thus far in 2011/12 or 4% less than last year and ethanol production has totaled 16.9 billion liters or 16.3% less than last year.