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Promising harvest and drop in ethanol sales lead Brazil to expand sugar production and exports

The Brazilian sugarcane harvest 2020/2021 is still in its infancy, but it is promising and should ensure that the country has a large availability of sugar for export. According to the “Biweekly monitoring of the Centro-Sul harvest” until May 16 released by the Union of the Sugarcane Industry (Unica), the crushing of sugarcane until the first half of May exceeded 103 million tons, an increase of 21.67% over the same period of the 2019/2020 harvest.

Of the total, 45.3% of the processed sugarcane went to sugar production, a percentage that in the 2019/2020 harvest corresponded to 32.19%. These data refer to the production of the Center-South of Brazil, which corresponds to approximately 89% of the national total.

The change in the production mix between ethanol and sugar is related to a change in market demand. According to the member of the executive committee of the Tereos Group and president of the Superior Council for Agribusiness of the Federation of Industries of the State of São Paulo (Fiesp), Jacyr Costa Filho, the dispute over oil prices between Saudi Arabia and Russia earlier this month March and the global pandemic resulting from covid-19 reduced oil and gasoline prices, which affected ethanol’s competitiveness. The product is used as fuel in Brazil. In addition, there was less demand for fuels in general.

At the same time, some countries, such as China, have again imported large quantities of sugar to replenish their stocks. The same is true for Muslim countries, due to the end of Ramadan, which ended on May 23.

Costa says that Brazil should export between 28 million and 30 million tons of sugar in this harvest and guarantee the equivalent to 50% of the global demand for the commodity. This is not only because Brazilian production and exports are growing, but because Thailand, which is the second largest exporter in the world, is facing a crop failure due to one of the greatest droughts in the last 40 years.

The technical director of Unica, Antonio de Pádua Rodrigues, says that Brazil should recover in 2020/2021 the record levels of sugar production registered three years ago. A total production of 38 million tons of sugar is expected in the 2020/2021 harvest, of which 36 million will be produced by plants in the Center-South and approximately 2 million to 3 million tons per unit in the Northeast. This total represents an increase of approximately nine million tons on sugar production in 2019/2020.

Both Rodrigues and Costa note that sugar prices in the international market are low, around US $ 0.10 to US $ 0.11 per pound, but the favorable exchange rate compensates for the low prices. “Prices fell, but the devaluation of the real against the dollar led to a gain in competitiveness and offset costs,” says Costa.

Costa notes that the Arab countries are already major importers of sugar, a commodity that in 2019 corresponded to 20% of Brazilian agribusiness exports. “The Arab countries are a very important destination for sugar. They are the third largest destination for agribusiness exports and are gaining relevance for Brazilian companies as they are also partners in investments ”, he says, recalling that there are Brazilian companies with industrial units in the Gulf and investments from Middle Eastern countries in the sector of animal protein from Brazil.

Padua notes that the Brazilian sugar and alcohol sector is also versatile and capable of meeting different demands. It can either produce ethanol for the supply of vehicles, produce alcohol for the purpose of disinfection, as occurs in greater volume this year, or produce sugar for domestic consumption and for export.

“Brazil has a differential in relation to other countries, which is to have 85% of the plants capable of producing sugar or ethanol and optimizing production”, he says.

 

Source: Comex do Brasil

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06.12.2020

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