Biosev SA, the energy division of France's Louis Dreyfus Commodities in Brazil, said on Thursday that a frost in Mato Grosso do Sul last week could reduce its cane crushing in the major sugar and ethanol producing state. The frost in the principal growing region of southern Brazil damaged nearly a fifth of the unharvested cane crop, potentially curbing sugar exports from the world's largest producer, agricultural research company Datagro told Reuters on Wednesday.
Three of Biosev's 12 industrial units are located in Mato Gross do Sul. The company, which is Brazil's second largest producer of sugar and ethanol, said in June it expected to lift output from all of its crushing units in Brazil by 12 percent to 33 million tonnes in the 2013/2014 season. Frost in tropical Brazil has long been a weather risk for global coffee markets. This frost, though, is the first in recent history that threatens to significantly cut sugar output and its impact will likely extend into the next harvest too.
A possible reduction in cane crushing could also hit ethanol output at a time when expensive fuel imports threaten to drag Brazil's trade balance to its first deficit in more than a decade. The government has unveiled a series of measures this year to bolster ethanol production as the industry tries to recover from the 2008-2009 credit crunch that hit bottom lines.