Brazil’s Biosev to raise sugar output, cut ethanol

(Reuters) – Aug 16 Brazil’s sugar and ethanol maker Biosev, the world’s second-largest cane processor, plans to increase sugar production next season at the expense of ethanol output, the company’s Chief Executive Rui Chammas said on Tuesday.

Biosev, controlled by French commodities trader Louis Dreyfus, will increase sugar production capacity by 88,000 tonnes in the 2017/18 center-south crop, Chammas told analysts during an earnings conference call.

“It seems natural that mills seek to produce more sugar, considering the estimates for a global sugar deficit,” he said.

“There is large potential for value generation through the conversion of existing installations to produce more sugar and less hydrous ethanol. It is a large payback,” said Chammas.

The global sugar market is entering a period of insufficient production that is estimated to last for at least two years, and maybe more, according to most analysts. Demand above output will lead to stocks consumption, boosting sugar prices.

Raw sugar futures have recently reached the highest values since 2012, reflecting expectations of a tight sugar market.

Chammas said it is clear that Brazilian mills will seek to increase sugar production, initially based on existing installations. Investment in new plants is yet to be evaluated, he added.

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Biosev has taken advantage of the recent futures rise. The company said it has already sold forward 40 percent of the sugar it will produce next season, which starts in April, at an average price of around 18.5 cents per pound.

The company plans to crush up to 33.5 million tonnes of cane in the current 2016/17 center-south crop.

Despite the favorable outlook in the sugar market, Biosev posted a net loss of 353 million reais ($111 million) in the quarter finished in June, compared to a loss of 333 million reais a year earlier.

The company said rising operational costs and an income tax adjustment were the main factors behind the weak result. (Reporting by Marcelo Teixeira; Editing by Daniel Flynn and Chris Reese)