Sugar output drop in key Brazil region tops 1.0m tonnes

June 24th, 2015

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Category: Sugar

Sugar-Beet450x299(Agrimoney) – The decline in sugar production in Brazil’s key Centre South so far this season has topped 1.0m tonnes, thanks to the appeal of turning cane into ethanol rather than the sweetener, data from industry group Unica revealed.

Mills in the Centre South, responsible for some 90% of Brazilian sugar output, produced 6.75m tonnes of sugar in 2015-16 up to June 16 – down from 7.76m tonnes at the same time of last season, Unica said.

The decline represents in part a drop in volumes of cane processed, with the crush this season reaching 153.9m tonnes, a drop of 3.1%.

However, the significantly bigger drop in sugar output – of 12.9% year on year so far – reflects also the preference by mills for producing ethanol from cane rather than the sweetener, with output of the biofuel showing a small increase so far in 2015-16, which started in April.

Unica has forecast Centre South sugar production falling by 190,000 tonnes to 31.8m tonnes over 2015-16 as a whole.

‘Bigger ethanol production mix’

“Once again, the production figures recorded so far confirm the trend of a bigger ethanol production mix for the current crop,” said Antonio de Padua Rodrigues, the Unica technical director.

Indeed, so far this season mills have directed 61.1% of cane at making ethanol, compared with 57.9% as of a year ago.

The appeal of the biofuel reflects improved demand, with Mr Rodrigues saying that “the increase in gasoline prices, tax changes observed in several consumer states in early 2015… are giving support to product sales in the Brazilian market”.

The administration of Dilma Rousseff has been implementing supportive legislation for the country’s biofuel industry, while gasoline prices have been on the rise as crude oil recovers from its six-year low at the start of the year.

Both hydrous and anhydrous ethanol can be used for road fuel, although anhydrous ethanol is suitable for blending into gasoline, and is exported to the US and other destinations, while hydrous ethanol is suitable for use in flex fuel vehicles, of which Brazil has the world’s largest fleet.

Price rally founders

The swing from sugar to ethanol by Centre South mills has been forecast by analysts, although the extent of sugar output in the latest period, the first half of June – down 15.0% year on year at 1.97m tonnes – was below expectations of many analysts.

Nonetheless, raw sugar futures for July, having staged a short-lived rally after the Unica data were released, closed down 2.0% at 11.12 cents a pound.

The better-traded October lot ended down 1.4% at 11.77 cents a pound.

Earlier, Centre South sugar and ethanol group Sao Martinho said that, counter to the regional trend, it was planning to increase the ratio of sugar to ethanol this year, to 52% from 49% last year, increasing its total sugar output over the season by 1.3m tonnes.

Last month Cosan, Brazil’s largest cane crusher, forecast rising sugar sales in 2015-16, while saying it was keeping the ratio of ethanol to sugar in the crush “largely unchanged” from last year.

Unica has forecast ethanol taking 58.1% of Centre South over the whole season.

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