Tag Archives: ethanol

Brazil’s ethanol in demand at the expense of sugar production.

Brazil’s forecast for the 2012/13 cane crush is unchanged at 512 million tonnes of cane and 31 million tonnes of sugar according to Datagro.  These figures are for center south production of between 545 and 575 million tonnes of sugar cane.  The price and demand for gasoline will determine sugar output in the coming season with U.S. demand for ethanol a possible reason for increased ethanol output in Brazil as opposed to sugar.  The U.S. is likely to import 2.5 billion litres of Brazilian ethanol up from 1.5 litres.

Dry weather resulted in Brazil’s 2012/13 sugar forecast being reduced by 1.5 million tonnes in September due to dry weather and lower yields.  Gasoline prices and U.S. demand for ethanol are variables likely to be monitored for further changes to forecasts.  Also being monitored is a possible decision by Brazil to increase the ethanol content in gasoline from 20% to 25%.  This would increase ethanol production at the expense of sugar production.

The increased demand for Brazilian ethanol described above would account for approximately 35 million tonnes of sugar cane. Hence an equivalent reduction in sugar production may be anticipated.

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World Sugar Outlook 2012

A consensus of analysts see sugar prices falling during 2012 with the world sugar surplus seen at just under 8 million tonnes in 2011/12 and falling to just over 3 million tonnes in 2012/13.  This is somewhat dependent on whether output will fully recover in the world largest producer Brazil, the amount of cane diverted to produce ethanol and exports from India.  Nevertheless, the surplus for 2011/12 creates a likely bearish market during 2012.

A fall in sugar prices may result in Brazilian millers diverting sugar to ethanol production.  Large harvests in Europe, India and Thailand have resulted in a higher world surplus.

It is believed that Brazil’s production will not recover significantly as the lower production figures are not due to weather or the amount of cane diverted to ethanol production but mainly due to older rations and lower yields.  Therefore, investment is required for an increase in yields and higher Brazilian production.

Raw sugar prices are forecast at around 22 cents during the second quarter during the Brazilian centre south harvest and at around 24 cents at the end of 2012.  White sugar is forecast at around $600 during the second quarter and around the same at the end of 2012.  Weather patterns could alter this forecast price projection.

The weather phenomena La Nina and El Nino are factors potentially impacting sugar supply.  La Nina tends to result in drier weather in the centre south of Brazil thereby delaying crops, harvesting and crushing.  El Nino which follows La Nina after the second quarter gives wetter conditions potentially impacting sucrose content.    La Nina also results in heavy rains, flooding in the Asia-Pacific region and occasional drought in Africa and South America.

White sugar is currently trading around $626.50 and raw sugar at 24.62 cents.

A major factor determining sugar prices during 2012 will be the price of ethanol and as a consequence the decisions by Brazilian mills to divert cane to ethanol production.  The ethanol parity is currently around the 20 cents a pound for raw sugar.  Below this raw sugar price mills would be expected to convert cane to ethanol and not to sugar.

Brazil likely to lower ethanol mix in gasoline adding to sugar supplies

Brazil may announce that it is lowering the percentage of ethanol required to be mixed in gasoline.  The primary source of ethanol in Brazil is from sugar cane and if the requirement for 25% ethanol is eased to 18% this would free up sugar supplies that would have otherwise been diverted to ethanol production.

Sugar futures declined on the news. The news follows a reported drop in cane production in Brazil’s center south due to older ratoons and lower yields.

 

BNDES provides $593 million in loans to ethanol sector

BNDES of Brazil is to provide 1 billion Reais ($593 million) in credit to the ethanol sector over the next four years to fund development of technology.  The funding is to develop technologies in connection with  ethanol and cellulosic ethanol.  The move is seen as a bid not to lag behind North America in developing second generation ethanol technologies.

Brazil was the world’s largest producer of ethanol before being overtaken by the US.  Brazil primarily uses sugar cane as feedstock for ethanol while the US primarily uses corn.  The US now produces twice the amount of ethanol produced by Brazil.

The loans will be to fund research and are available from BNDES and FINEP, an arm of the Science Ministry.

Tereos invests $130 million in Brazilian natural sweeteners market

Tereos is seeking to expand into the natural sweeteners market in Brazil by investing $130 million in a starch factory with further investments possible.  The company seeks to tap into the fast expanding market that is evolving and becoming increasingly sophisticated, in the sense that the ingredients being used aim to improve the quality and property of food products resulting in lower use of calories and higher fibre content. The market is thought to be expanding by between 5% to 10%.

The Brazilian investment compliments the company’s sugar production in Brazil and allows it to further expand outside Europe.   In 2010 Tereos announced a joint venture with Malaysian Pure Circle to develop products made with natural sweeteners to compete with existing artificial sweeteners saccharin, aspartame and sucralose.

Cargill recently announced an investment in a corn processing mill in Brazil to produce starch and sweeteners.  Brazil’s Petrobras concluded a $1.2 billion deal with Tereos in 2010.

Tereos invested in Brazil’s sugar market a decade ago by establishing a joint venture which was followed by acquisitions and gradually increased market share.  Tereos is now Brazil’s third largest such group.

Brazil is the world’s largest exporter of sugar and responsible for more than 50% of sugar trades.

Middle East tension and weaker dollar keep sugar market on edge

Protests have been broken up in Bahrain where two protestors were killed. The protesters are primarily from the Shiite majority. Protests are also planned tomorrow in Libya. Meanwhile Iran has announced that two of its war ships are to pass through the Suez Canal for the first time since 1979.  Israel has announced that it viewed the move as a hostile act.

Renewed tensions in the Middle East following the Tunisian and Egyptian revolutions, yesterday resulted in a sharp rise in the Brent crude futures contract which closed at $103.78 per barrel.  Rising oil prices provide ethanol and sugar futures with support and along with  a weaker dollar, with further dollar weakness expected, March raw sugar futures ended up 3% to close at 31.54 cents per lb.

Will ethanol save Australia’s ailing sugar industry?

Australian MPs are seeking to change legislation that restricts ethanol use in petrol to 10% in a move to revive and save Australia’s ailing sugar industry.

Seven sugar mills have closed in Queensland over the past decade leaving only 22 remaining mills.  A further mill in Cairns, Queensland recently announced that it will be closing.  The sector employs over 45,000 people in Australia. 

A campaign for wider ethanol use is proposed and the Australian Workers Union has been asked to actively promote and support the campaign.