Aug 31, 2010
Dry Weather Hurting Sugarcane Yields in Southern Brazil
Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.
For the second year in a row, the sugarcane harvest in southern Brazil is expected to be lower than what was originally estimated at the start of the season. Last year, the problem was heavy rains during October and November that kept harvesters out of the fields and lowered the quality of the sugarcane that was harvested. This year, the cause of the shortfall is exactly the opposite. Recent dry weather in southern Brazil is lowering sugarcane yields and the forecast calls for continued dryness, at least in the near term. According to the Union of Sugarcane Industries - Unica, dry weather in southern Brazil is expected to lower sugarcane tonnage by 40 to 50 million tons compared to what was expected at the beginning of the season.
Conab has been estimating that Brazilian sugarcane growers would harvest 664 million tons of sugarcane during the 2010/11 season, but the tonnage now is more likely to be in the range of 620 million tons.
The reduced sugarcane yield, in conjunction with the ever expanding use of flex fuel cars in Brazil, has many market observers wondering if there will be enough ethanol produced to meet the domestic demand during the intra-harvest period, which is generally considered to be the time between November and March.
During the sugarcane harvest (March through November), there are ample supplies of ethanol to meet domestic and export demand, but the lack of ethanol storage often times leads to spot shortages of ethanol between harvests, especially in areas where sugarcane is not grown. Last year, the shortage was especially acute and domestic ethanol prices in Brazil reached near record levels.
During January to March of 2010, many Brazilian consumers who had flex fuel cars switched from ethanol to gasoline due to the high price of ethanol. They switched back to ethanol once the sugarcane harvest resumed and ethanol prices declined. During the period of the shortage, the Brazilian government reduced the amount of ethanol in Brazilian gasoline from 25% to 20% for a 90-day period as a way to stretch out tight supplies. It is uncertain if similar action would be taken again this year.