Center-South Region - Usina São Martinho sugar and ethanol production unit
Sugar and Ethanol

Global sugar deficit intensifies with Brazil’s preference for ethanol

May, 15, 2019 Posted by datamarnews

Week 201921

Brazil’s center-south region will produce less sugar than expected in the new season that started in April, according to commodity broker INTL FCStone. High oil prices and therefore gasoline prices in the country have caused cane mills to favor ethanol production over sugar production.

“Looking at prices for oil and sugar since early this year we see that oil rose 35% while sugar fell 5%,” FCStone said.

The organ has reduced its sugar production estimate for Brazil’s main production belt to 27.8m tons, from an earlier estimate of 29.5m tons in March. According to the sugar industry group Unica, mills in the country’s center-south region only utilized 30.83% of sugarcane for sugar production in the second half of April (H2 April), compared to 35.57% used during the same period last year. The preference for ethanol, coupled with delays in sugar cane harvesting have meant the South American country’s sugar production dropped by 32.86% to 1.03m tons in H2 April 2019, year-on-year. “If sugar production per ton of sugarcane was the same as last year, the total production would reach almost 1.7m tons,” Unica Technical Director said.

FCStone has readjusted Brazil’s ethanol production projection to 29.1bn liters in the 2019/20 season, from 27.6bn liters estimated in March.

According to INTL FCStone data released on Tuesday, the global sugar deficit will reach 5.7m tons in the 2019/20 cycle, from only 0.3m tons seen in the previous cycle. In addition to Brazil’s reduced production, the broker expects sugar production will also fall in India, Thailand, and China. However, sugar stocks of 74m tons should limit increases in sugar prices.

The following graph (based on Unica data) displays Brazil’s sugar and ethanol production patterns for the last six seasons:

 

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