Oct 31, 2009
Alcohol Prices Rise In Brazil Due To Temporary Shortages
Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.
Alcohol prices in Brazil have risen significantly in recent months due to short supplies caused by heavy rains delaying the sugarcane harvest in Sao Paulo. During the last thirty days alone, prices have risen 14% in the state of Sao Paulo. The price spike is due to a temporary shortage of product in the market and most analysts feel the situation will correct itself by early 2010. In fact, the weather has turned dryer in recent days and if this trend continues, an additional 30% of the intended sugarcane production for 2009 could still be harvested before the end of the year.
According to the Union of Sugarcane Producers (Uniao da Industria de Cana-de-Acucar - Unica), the start of the 2010 sugarcane harvest is expected to start in March, month earlier than normal and the 2010 harvest is expected to be 50 million tons larger than the 2009 harvest. Brazilian scientist have been developing new sugarcane varieties with varying maturities in order to more evenly spread out the harvest. Ideally, sugarcane processors would like to be able to process sugarcane for eleven months of the year with only one month of down-time for annual maintenance.
Due to the domestic shortage, alcohol exports to the European market and the U.S. in 2009 will reach only 50% of what they were in 2008. This trend is expected to reverse itself in early 2010 when the new harvest begins. Another reason for the lower exports has also been the strengthening of the Brazilian currency compared to the dollar. The strong local currency makes all agricultural exports more expensive. The Brazilian government has taken a series of steps in recent weeks in an attempt to keep the currency from strengthening even further.