South America Calling

Brazil's center-south is now expected to produce more cane this season as rains since November eased the stress caused by a very dry winter, the industry association said.

According to the Brazilian Sugarcane Industry Association (Unica), production will total 567 million metric tons (mmt) in 2014-15, some 25 mmt higher than its August forecast but still lower than the 597 mmt produced last year.

Next year, output will likely be similar to this year but margins will be better on the prospect of rising ethanol prices, said Antonio Padua Rodrigues, technical director at Unica.

Favorable tax changes in the states, most notably in Minas Gerais where sales tax on gasoline will rise and on ethanol fuel will fall, and a probable hike in the percentage of ethanol in gasoline from 21% to 25% in May will bolster prices for the biofuel, he explained.

The improved prospects will prompt Brazil to produce more ethanol than previously thought from the 2014-15 harvest, which started last April and is now winding up.

The top-producing center-south region will produce 15.0 billion liters of ethanol this season, up from the August forecast of 12.7 billion liters and slightly higher than the 14.6 billion liters produced last year.

Little of the extra 25 mmt of cane forecast will be diverted to sugar. Sugar output is pegged at 31.9 mmt compared with 31.4 mmt in August and down sharply from 34.3 mmt last year.

The improved outlook will come as a relief for Brazilian mills and distillers, which have suffered amid tight profits since 2008.

According to Unica, some 80 mills have closed and another 67 have gone into bankruptcy protection over the last seven years amid a crisis underpinned by the government's policy of holding down gasoline fuel prices to control inflation.

That said, with the sharp decline in fuel prices in recent months, Brazilian fuel producers are actually benefiting from the government's fixing of prices, which haven't been adjusted.

(AG)

© Copyright 2014 DTN/The Progressive Farmer. All rights reserved.