BRAZIL: Sugar drops to near parity with ethanol, millers switch

Published: 06/06/2012, 5:03:57 PM

Sugar has stopped being the more profitable product for Brazilian millers in the early portion of this year's harvest, the first time it has fallen behind ethanol for an extended period since 2009, according to Brazilian newspaper Folha de S. Paulo. 

Based on domestic market trade, the financial yield of anhydrous ethanol is now equal to sugar in the Brazilian northeast, and is only 3% behind sugar's profit margin in the centre-south. Hydrous ethanol still yields 15% less profit than sugar, but if the sweetener's price continues to decline in foreign markets it will likely lose its advantage overall. 

The 3% difference for anhydrous is too small still, because each mill has different costs and income levels. Due to the recovery of sugar production in other countries, sugar's price has fallen to near parity with ethanol. 

Mills should soon opt for more ethanol production, which would be best for a fuel-hungry Brazilian market.