Jan 04, 2010
Sugarcane Producers In Brazil Expect A Big Year In 2010
Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.
The sugarcane producers and processors in Brazil are very optimistic that 2010 will be a very good year for their industry. Everything seems to be going their way - international sugar prices are high, domestic ethanol prices are high, over 90% of all new Brazilian cars are flex fuel, 55% of the fuel used in light vehicles is now ethanol, Brazil is committed to the use of more biofuels, and new sugar mills actually produce more energy than they consume contributing to increased electrical production for the nation.
According to the Union of Sugarcane Industries (Unica), the sugar mills of southern Brazil processed 532 million tons of sugarcane in 2009. Of the total sugarcane processed, 44% went toward sugar production, which was an increase of 9% compared to 2009, and 55% went toward the production of ethanol, which was a reduction of 6% compared to 2009. Data from Conab indicated that Brazil produced 34.6 million tons of sugar in 2009, which was nearly 10% more than in 2008 and the highest production in 30 years. Brazil exported 23.2 million tons of sugar in 2009 compared to 20.7 million tons in 2008 with India and Russia being the two largest importers.
Heavy rains during October and November disrupted the sugarcane harvest in Sao Paulo forcing farmers to delay the harvest of 30 to 35 million tons of sugarcane. The cane left in the field at the end of last year will be harvested in early 2010.
Prices for both sugar and ethanol should remain strong in 2010 due to tight carry over supplies and high demand for both sugar and ethanol. Each month, Brazilian automakers sell approximately 200,000 flex-fuel vehicles, which give the owners the option of purchasing ethanol or gasoline depending on the price. If the price of ethanol (E100) is less than 70% the price of gasoline, it is more economical to use ethanol. Already, approximately 55% of the fuel consumed by light vehicles in Brazil is ethanol as compared to gasoline. In addition to purchasing E100, which is available at every gas station in Brazil, the gasoline in Brazil also contains 25% ethanol.
Currently, nearly all the sugar mills in Brazil are closed for annual maintenance and a few mills will resume processing sugarcane by the end of January. Most of the mills in Brazil will resume operations in February or early March.