Forget sugar price boom - Brazil

BARRING a major weather disaster in Brazil or India, canegrowers have been advised to farewell the heady prices of last year’s season.

And even severe drought or floods in either of those two countries may not exactly skyrocket the world sugar price back to the golden US30c/lb it reached in 2009.

It’s a message that Andy Duff, manager, Food and Agribusiness Research and Advisory, Rabobank, Brazil, delivered to Queensland canegrowing districts last week on an Australian tour.

His address in Bundaberg drew about 30 people keen to get a clearer picture on how the Brazilian cane industry works and the impact it will have on the global market.

Mr Duff gave an overview of the industry, pointing out key considerations including the fact that Brazil’s domestic ethanol market accounts for 85 percent of output, while its domestic sugar market accounts for just a 33pc output.

It boasts a staggering 438 mills which are largely family owned across 150 companies, and 75pc of cane is produced by the mills on land they own or rent, with the remaining 25pc produced by 70,000 independent growers.

A more sobering point for growers at the Bundaberg meeting was Mr Duff’s information regarding potential Brazilian expansion.

Since 2005, the country has experienced a sharp rise in the number of mills being constructed, peaking in the 2008/09 season when 30 new mills began.

“If you think that nobody will put up a new mill in Brazil that crushes less than two or three million tonnes of cane, then we are talking about the capacity to produce 50 or 60 million tonnes of cane coming on stream each year,” Mr Duff said.

And there appears to be no shortage of cane to put through those mills.

According to Mr Duff, over the past five years more than 200mt of cane capacity has been added.

“By my maths, that’s five or six Australias, so that’s an Australia every year being added to this industry,” he said. “So it’s big, and it’s been growing very, very fast.”

In some respite for other countries, most of that extra cane went into ethanol production rather than sugar, which begged the question as to why prices slumped in the second half of the past decade.

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