Millers in Brazil's key centre-south sugar cane area see prospects for another record crop next season, May 2005 through April 2006, as strong demand for ethanol and attractive prices encourage increased planting. The centre-south, which grows 85 percent of the cane crop in the world's largest producer, is expected to produce 330 million tonnes this season.
"If Brazil isn't hit by a 'hurricane,' the scenario looks very good," Luiz Correa Carvalho, Director of Canaplan consultancy, said on Friday. "Production should be higher due to a bigger area, new mills and the climate."
But no one is betting on the size of the next crop because weather up to the start of 2005 will be crucial.
"In general there's a stimulus to expand production," said Ricardo Ferreira Santos, Superintendent of Crystalsev, one of Brazil's biggest sugar and ethanol exporters.
Attractive prices, due to firm demand for ethanol, are driving an expansion in production, industry sources said, noting that the price of the cane-based fuel had risen 180 percent since March.
Ethanol consumption has risen above 1.3 billion litres a month, compared with 840 million litres in May at the start of the cane harvest, as its price became more attractive compared with gasoline.
Other countries have also seen Brazilian ethanol as a cheaper substitute for increasingly expensive gasoline.
"Ethanol has grabbed market share due to gasoline's firm price and this trend shall continue next year," Carvalho said, warning that domestic demand could drop if the economy slows and revenues slide.
Ethanol's share of the cane crush in the 2005/06 harvest is widely expected to be greater than in recent years and this will help support sugar prices.
"The harvest will be oriented toward ethanol - we must supply both domestic and export markets. As a result sugar exports in 2005 are likely to be lower than this year," said Jose Pessoa de Queiroz Bisneto, President of Group J.Pessoa.
Brazil is expected to export a record of about 2 billion litres of ethanol this year. The contracts were struck when Brazil had surplus supplies and low domestic prices.
Millers believe it would be possible to export more if they increased production.
Another factor favouring expansion in the centre-south is a decline in soybean prices and subsequent fall in land values, which has made mill expansion projects more viable.
Comments
Comments are closed.