Brazil's sugar and ethanol sector, which took on huge debts in recent years to expand, was hammered by the credit crunch that ensued from the global financial crisis and drove many heavily leveraged mills into rivals' hands
Mills in the world’s biggest producer and exporter of cane-based sugar and ethanol are regaining their purchase as sugar prices hover near 30-year highs and the world slowly tries to work its way out of a sugar supply deficit.
At events during Sugar Week, held every other year in Sao Paulo, industry leaders expressed guarded optimism that the worst of the crisis had passed but said it may have changed Brazil’s cane sector for good.
Following are some details about Brazil’s cane industry:
- Brazil is the world’s biggest and lowest-cost sugar producer and accounts for around 45 percent of the world’s exports of the sweetener.
- Brazil’s 2009/10 cane crush is seen at a record 629 million tonnes, up from the 572 million tonnes last season, but this official government forecast is expected to be lowered due to rains that are hurting harvesting and yields.
- Sugar is seen at a record 36.7 million tonnes, and ethanol at a record 27.8 billion liters. In the previous season, output was 31.6 million tonnes and 26.7 billion liters, respectively.
- Most of Brazil’s 400-odd cane mills are still family owned in complex ownership structures.
- Investors in the sector include large millers such as Cosan (CZZ.N), Copersucar and Crystalsev, multinationals such as Cargill Inc [CARG.UL], Bunge Ltd (BG.N), ADM Co (ADM.N) and Louis Dreyfus, several private equity funds and now even oil majors such as BP (BP.L) and Petrobras (PETR4.SA)(PBR.N).
- Ethanol is the other side of Brazil’s cane industry. The biofuel that is distilled from the same cane juices as sugar provides an alternative demand for the crop.
- As a world pioneer in biofuels, Brazil began its sugar cane-based ethanol program 30 years ago.
- Brazil mandates a 20-25 percent blend of ethanol in all commercial gasoline, aside from the pure ethanol sold at filling stations.
- Brazilian ethanol yields as much as eight times more energy than is used to make it. U.S. ethanol yields at best two times the energy that goes into the production process.
- Domestic demand for ethanol is being driven by the popularity of the flex-fuel car technology that was launched in 2003 and now makes up around 90 percent of new vehicle sales.
- Most mills are fitted with biomass electric energy plants that run on bagasse, the material left over after juice is extracted from the cane.