Mar 25, 2010
Renewed International Interest In Brazil's Sugar/Ethanol Industry
Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.
Brazilian ethanol production during the 2010-11 crop year (April to March) is expected to top 27.4 billion liters compared to 24.0 billion liters produced in 2009-10. This is according to the consulting firm F.O. Licht. The firm also increased their estimate of the Brazilian consumption of ethanol from 22.5 billion liters in 2009-10 to 25.2 billion liters in 2010-11. The increased production of flex-fuel cars in Brazil is expected to keep ethanol demand expanding for the indefinite future. Licht estimates that the ethanol carry over in Brazil will be 1.82 billion liters, which is an improvement compared to the 1.57 billion carried over last year. In fact, last year's carry over was tight enough to drive Brazilian domestic ethanol prices to record highs in late 2009 and early 2010.
Exports of ethanol from Brazil in 2010-11 are estimated at 3.1 billion liters, which is about equal to the prior year, but still below the 4.7 billion liters exported in 2008-09. The United States is the principal importer of Brazilian ethanol. In 2010, its estimated that the U.S. will import 1.1 billion liters of Brazilian ethanol, which is unchanged from the amount imported in 2009, but about half that was imported in 2008.
As the world's economies start to recover, international interest in Brazilian sugar/ethanol production is returning. The construction company KPMG estimates that there could be more completed sugar and ethanol plant acquisitions/construction coming on-line in 2010 than the 14 that came on-line in 2008. Most of the projects currently in the works are small or medium in size, but larger projects are expected to get underway during the second half of 2010.
Consolidation continues to be under way in Brazil's sugar/ethanol industries. In 2007-08, the ten largest producers of sugar/ethanol accounted for 28% of the sugarcane crushing capacity in Brazil. In 2009-10, the ten largest producers increased their percentage of the total crush capacity to 34%. In 2008-09, 12% of the capital invested in sugarcane processing in Brazil came from foreign investors. By January 2009, that percentage had increased to 23%.
The new sugarcane harvest season begins in southern Brazil in March or early April and it will continue generally through November or December.