South America Calling
Alastair Stewart South America Correspondent

Wednesday 03/26/14

Drought Hits Brazil Sugar, Ethanol

Dry weather in January and February didn't just hurt Brazil's soybean and corn crop, it has also reduced the prospects for the sugarcane, which will be harvested in the center-south from April.

This week, respected local consultancy Datagro forecast the 2014-15 center-south crop would total 574.6 million metric tons (mmt), down 3.6% on last year.

The drought came at a crucial time during the development of the sugarcane, which is principally planted in and around Sao Paulo state.

As a result, center-south sugar output will fall 3.2% to 33.2 mmt in 2014-15 and ethanol output will slip 7.4% to 23.6 billion liters (6.2 billion gallons).

According to Datagro, a recent hike in domestic ethanol prices will prompt exports of the fuel to fall 35% next season to 1.7 billion liters (450 million gallons), but output will remain well below potential domestic demand.

While the government has raised fuel prices, the hike is not sufficient to stimulate significant investment, and the industry crisis, which has lasted five years already, is set to continue.

With margins not wide enough to justify the building of new sugar and ethanol plants and the sector's indebtedness still at elevated levels, major expansion is off the agenda.

(AG)

Posted at 11:27AM CDT 03/26/14 by Alastair Stewart
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