Apr 29, 2019

More Sugar/Ethanol Mills in Brazil Close their Doors

Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.

Hard times continue for sugar/ethanol mills in Brazil. Low sugar prices and increased cost of production has led to more mills requesting bankruptcy protection while they attempt to reorganize their finances or they have closed their doors. Many mills have been undercapitalized for years and as a result, more mills are now closer to closing their doors.

Information provided to Agrolink by RPA Consultoria indicate that 12 mills requested bankruptcy protection between April 2018 and April 2019. This represents a 17% increase over the prior year. The number of mills that closed their doors over the past year increased 8% while the number of mills reporting sound finances declined 3.7%

Currently, there are 444 sugar/ethanol mills in Brazil with 79 (18% of the total) in bankruptcy protection, which is 12 more than last year. Of these 79, 49 are still operating and 30 have stopped processing sugarcane. Twenty mills declared bankruptcy this past year, which is two more than the prior year. In 2019, 343 sugar/ethanol mills will operate in Brazil (77% of the total), while 101 mills will not operate (23% of the total), which is 4 more than last year.

Conab recently released their 4th Sugarcane Crop Report for the 2018/19 growing season and they estimated that Brazil produced 620.4 million tons of sugarcane in 2018/19 which represents a decline of 2% compared to the 633.2 million tons produced in 2017/18. Brazil harvested 5.59 million hectares of sugarcane in 2018/19, which is down 1.6% from the previous year.

Brazilian mill operators put much more emphasis on ethanol production in 2018/19 than on sugar production. Brazil will produce 33.1 billion liters of ethanol in 2018/19, which is up 21.7% compared to 2017/18. In contrast, Brazil will produce 29.0 million tons of sugar in 2018/19, which is down 23.3% compared to 2017/18.

The Union of Sugarcane Industries (Unica) is reporting that during the first half of April, 76% of the sugarcane has been directed for the production of ethanol, which is even more than the last harvest season when it was 68%. Wet weather during early April slowed the start of the 2018/19 sugarcane harvest season. As of April 15th, there were 150 sugar/ethanol mills processing sugarcane, compared to 174 mills last year at the same time.

The southeast region of Brazil, which includes the states of Sao Paulo and Minas Gerais, is responsible for approximately 64% of Brazil's sugarcane production.