The market share of independent sugar cane suppliers in Brazil's center-south may fall as strong output continues to weaken sugar and ethanol prices, a cane suppliers' representative said. Independent cane suppliers accounted for about 20 percent of Brazil's center-south 2007/08 cane crushing, which totalled 431 million tonnes.
Set by sugar and ethanol values, cane prices on average were 32 percent lower than in the previous season and below production costs, said Manoel Ortolan, director of Brazil's independent center-south sugar cane growers organisation, Orplana. "Brazil's cane industry is expanding rapidly, and mills have more power than us to finance this expansion," Ortolan said late on Friday. "So the trend is for the market share of the independent supplier to fall."
Normally, most of the cane crushed by mills in Brazil comes from their own planting, but a portion is supplied by independent producers. Booming local demand for ethanol and the expectation of rising exports of the biofuel have prompted a fast expansion in the region's cane planting.
The recently started harvest season is expected to reach almost half a billion tonnes of cane. Brazilian cane output rose by 200 million tonnes in the last five years, according to the Sugar Cane Industry Association (Unica). Big local players, international companies and investment funds have invested large sums of money, and more are expected to come in the next few years.
They based their bets on the medium- and long-term perspectives for ethanol, considering the world's need for cleaner and cheaper sources of energy. The outlook remains bearish in the short term. "Prices are very low and do not even cover production costs," Ortolan said, adding that expectations for the new crop are even worse as production costs continue to grow, due to rising oil prices.
Prices of the most common fertilisers used in Brazil doubled in a year to 1,500 reais per hectare currently. Due to the lack of profitability, some cane suppliers that had switched from grains in the recent years have started to switch back again. "The situation now is the opposite than it was two years ago, when sugar prices were high and grain prices were low," he said. "There are already suppliers using their cane to feed the cattle and starting to plant soya."