Brazil's government on Thursday raised its estimate for total sugar production in the current crop to 39.38 million tonnes, almost 700,000 tonnes more than last year, as mills boost the amount of cane they earmark for producing the sweetener. The larger output, which will add to a global oversupply of sugar, happens even as the country is expected to process a smaller amount of cane of 646.33 million tonnes in the 2017/18 crop cycle, nearly 10 million tonnes below 2016/17.
As a result, ethanol production is falling. Brazil's food supply and agricultural statistics agency Conab projected in the report released on Thursday that the country will produce 26.11 billion liters of the cane-based biofuel in the current crop, 6.1 percent less than in the last season. Despite lower global sugar prices, mills had fixed prices for a large amount of this year's sugar production at more favorable levels than last year, and had to produce more of the the sweetener to fulfill contract commitments.
Conab said sugar was still giving mills better profit margins than ethanol, whose margins have been squeezed by falling domestic gasoline prices. As an example, production of hydrous ethanol, the type of fuel used by Brazil's flex-engined cars, is expected to fall 10 percent in 2017/18 compared to the previous season. Conab expects a better performance for the North/Northeast region this year.