Brazilian corn ethanol boom reshuffles global sugar market
Production of bioethanol made from maize is booming in Brazil, beginning to displace traditional cane ethanol. Corn ethanol’s share of the domestic market is expected to rise to around 32 per cent this season, compared to 23 per cent a year earlier. This shift is reducing demand for sugarcane used for biofuels, with more and more going into sugar production. As a result, the global supply of raw material is increasing, which has caused sugar prices to fall to their lowest level in four years. For importers, this means cheaper raw material, but for producers, pressure on margins and profits.
Losses for producers and new challenges for the sugar industry
The sector’s biggest Brazilian giants, such as Raízen SA and São Martinho SA, are feeling the effects of the changes. Their shares are down 56 per cent and 37 per cent respectively this year. Analysts predict that Brazilian sugar production will reach 43 million tonnes this season, up 4.6 per cent on the previous year. Such a large supply could keep prices low, even with growing global demand for biofuels. At the same time, the government in Brasília has increased the proportion of ethanol in petrol blends to boost the domestic market for renewable fuels. However, experts warn that the expansion of corn ethanol could permanently change the structure of Brazil’s agro-energy sector, making it less dependent on cane crops but more sensitive to fluctuations in corn yields.
