- Brazilian sugar mills are expanding their sugar production capacity by up to 10% for the upcoming season, taking advantage of high sugar prices.
- The shift comes as corn becomes a cheaper feedstock for ethanol, prompting a move away from sugarcane-based ethanol production.
- Despite increased production capacity, Brazil may not produce more sugar this season due to adverse weather conditions impacting sugarcane yield.
Brazil’s sugar mills increase production capacity amid high prices
Brazilian sugar factories will increase their sugar production capacity by up to 10 % in the coming season, which begins in April. They will benefit from the relatively high raw material price and the increasing availability of corn as a profitable source for ethanol production. As the world’s leading producer, accounting for almost 50% of global trade last year, Brazil was able to expand its industry, especially when unfavorable weather conditions related to the El Niño phenomenon affected production and exports from competitors such as India and Thailand. Although prices fell from a 12-year high in November, they remain at historically high levels, prompting Brazilian sugar factories to accelerate their expansion and new projects. Currently, the price is 60% higher than Brazilian ethanol, which is the largest price differential in 15 years, according to brokerage and logistics firm Czarnikow.
Strategic shifts and climate challenges
Major investments are driving growth in Brazil’s sugar and ethanol industry. Notable companies such as Jalles Machado, Cerradinho Bioenergia, and Coruripe are launching new plants and production lines. The French firm Tereos is set to increase its sugar production from sugarcane, aiming for 70% usage compared to 67% last season. However, despite these expansions, Brazil’s sugar production might not exceed last season’s output due to less favorable weather conditions.
Interestingly, there’s a significant shift towards corn-based ethanol, with its production expected to rise by 16% to 7.2 billion liters. This comes even as sugarcane-based ethanol production is anticipated to drop by almost 3 billion liters, or 10.4%. This pivot is largely due to Brazil’s booming corn production, which has made corn ethanol more cost-efficient. Consequently, this encourages sugar mills to focus more on sugar production amidst the evolving dynamics.
