Ethanol demand in Brazil may see sugar cane diverted to ethanol production rather than sugar thereby dashing hopes of the possibility of higher sugar production to ease supply. It is expected that some growers may increase the size of their crops to take advantage of higher sugar prices which in turn may see prices fall later in the year as supply concerns ease.
Despite a larger sugar cane crop expected in 2011/12 sugar production is unlikely to be significantly increased or changed due to the diversion of cane to ethanol production. Rising domestic ethanol demand in Brazil is likely to continue into next year.
Brazil’s sugar production figures, rising domestic Brazilian ethanol demand, India’s OGL sugar exports now looking unlikely, EU out of quota imports and the impacts of cyclone Yasi on Australian production may provide sugar prices with support as concerns grow concerning supply tightness.