MECAS(12)05 – Outlook of Sugar and Ethanol Production in Brazil - English
Publisher: International Sugar Organisation
Format: digital download (PDF), 11.7” × 16.5”
Publication date: 2012
Brazil has the world’s largest and most diversified sugarcane processing industry and is the leading producer of sugar and cane-based ethanol. The country had the fastest growing sugar industry in the 90s and the first decade of the 2000s. Indeed, Brazil’s share in world sugar production and exports increased from 7% and 6% in 1990 to an impressive 25% and 50% in 2010. Since 2009, the last time the ISO published a paper on Brazil (MECAS (09)06 on “Outlook on Brazil’s competitiveness in sugar and ethanol”), Brazil’s frenzied expansion has come to halt. The country has been grappling with a successive number of production challenges, including falling agricultural yields, escalating production costs, environmental obligations to speed up harvest mechanization, a strengthening national currency and adverse weather, among others. On the industrial side, a flurry of joint ventures and mergers and acquisitions has continued to reshape the market shares of the leading players, but the focus has shifted to brownfield rather than new greenfield mill investments.
This paper is structured into 5 parts. Part 1 presents the background as well as Brazil’s sugar/ethanol output relative to world production. Part 2 assesses the recent developments in Brazil’s cane sector, the drivers behind cane yield performance, an assessment of cane production costs versus cane prices, and a comparison of gross returns per hectare between cane and other major competing crops like soybeans and maize. Part 3 of the paper presents the recent developments in industrial cane crushing by group of mills, detailing the market leaders and the role of foreign direct investment. This part also elaborates on the economics behind the split of cane into sugar or ethanol. Part 4 of the paper examines the six major drivers impacting Brazil’s competitiveness in sugar and ethanol in the world market, from production costs to diversification into cogeneration and bioplastics. Part 5 of the paper assesses the outlook for domestic and international demand for Brazil’s sugar and ethanol and presents a forecast of supply and export growth to 2020.
The paper concludes that there are enough reasons to believe that the Brazilian sugar/ethanol sector will continue to expand over the current decade, although at a significantly lower rate of growth. The ISO projects that cane production growth in Brazil is expected to average around 3% a year between 2010 and 2020, compared to 10% a year in the previous decade, taking cane output to around 850 mln tonnes by 2020. This would be sufficient for Brazil to ensure that around 20% of the projected light vehicle fleet runs on hydrous ethanol whilst at the same time allowing the country to keep its current share in world sugar production, resulting in ethanol production of 43.6 bln litres and sugar output of 47.5 mln tonnes in 2020.
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