Brazil Sugar Mills May Use 55% of Cane for Sweetener

Brazilian sugar and ethanol mills may turn as much as 55 percent of their crops into sweetener as a slumping currency encourages exports and prices for the alternative fuel slump, producer Maurilio Biagi Filho said.

The world’s largest sugar-cane processing industry will boost the percentage of crops turned into sweetener this year from 40 percent in 2008, Biagi said. Though some mills can turn as much as 60 percent of their cane into sugar, new mills designed exclusively for ethanol production will limit the industry’s overall capacity to make sweetener, he said.

“Everyone is going to make as much sugar as they can,” Biagi, the world’s second-biggest sugar-cane grower, said yesterday in an interview from Ribeirao Preto, Brazil. “If they could turn all the cane into sugar, they would.”

The Brazilian real has slumped 27 percent during the past seven months because of the global credit crunch, boosting the local-currency value of sugar exports. The credit shortage has also prompted millers to accelerate selling ethanol for cash, pushing prices down, Biagi said.

“Mills that don’t produce sugar, only ethanol, are in a complicated situation,” said Biagi whose family produces about 10 percent of Brazil’s sugar-cane output.

Sugar futures, down 8 percent in New York over the past seven months, have jumped 26 percent in Brazilian real terms.

Ethanol prices in Brazil have slumped 16 percent during the same period, according to data from the University of Sao Paulo’s farm commodities research unit, known as Cepea. About 90 percent of new cars sold in Brazil last year can run on the alternative fuel, gasoline or any blend of the two.

Higher Production

Brazil will boost sugar-cane output by about 11 percent next year and produce record amounts of sweetener and ethanol, Alexandre Strapasson, sugar-cane director at the Agriculture Ministry’s Conab crop-forecasting agency, said on Dec. 15.

Last year, Brazil harvested 571.4 million metric tons of sugar cane that was crushed into 32.1 million tons of sweetener and 26.6 billion liters of ethanol (7.02 billion gallons), according to government data.

Biagi is the chief executive officer of Maubisa Agricola Ltda., a sugar and ethanol producer. His brothers Luiz and Andre are the controlling shareholders of Santelisa Vale SA, Brazil’s second-largest sugar-cane processor.

source: bloomberg