Aug 01, 2014
Brazil's Sugarcane Harvest may end a Month Earlier than Normal
Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.
The combination of a severe drought earlier in the year and the current rapid sugarcane harvest pace has some analysts predicting that the Brazilian sugarcane harvest will end 30 days earlier than normal this year. That is the assessment of the consulting service Datagro who is predicting that the sugarcane harvest in southern Brazil will wrap in in the middle of November instead of when it normally ends in the middle of December.
The drought earlier in 2014 reduced the overall sugarcane growth thus allowing for a more rapid sugarcane harvest. The eventual end of the sugarcane harvest season will also depend on the amount of rainfall between now and the end of November. Most of Brazil's sugarcane is mechanically harvested and periods of heavy rainfall prevent the harvesting machines from entering the fields. There is the possibility that El Nino could increase the rainfall in southern Brazil this fall thus delaying the harvest progress in spite of the reduced volumes of sugarcane.
Datagro is estimating that the 2014/15 sugarcane harvest in southern Brazil will total 560.5 million tons or 6% less than what was harvested in 2013/14. They are estimating that Brazil's sugar production will decline in 2014/15 by 5.8% to 32.3 million tons and that ethanol production will decline 8.5% to 23.4 billion liters.
The Coordinator for Sugar and Ethanol in the Ministry of Agriculture Cid Caldas, estimates that the sugar sector in Brazil needs to invest R$ 50 billion reals in the next eight years in order to meet the estimated increased demand for ethanol. The Energy Research Company (EPE) calculates that the current consumption of 27.3 billion liters of ethanol per year in Brazil will double in nine years to 54.5 billion liters.
As a result, government officials see the need for the construction of 40 new sugar/ethanol mills over the next decade to increase Brazil's current processing capacity from its current 600 million tons of sugarcane per year to over one billion tons per year. Ironically, approximately 40 mills have closed their doors since 2009 due to the current downturn in the sugar sector, which is one of the worst in history.
Several factors have contributed to the current crisis in the sugar sector including: a worldwide slowdown in economic activity, a lack of affordable credit, several years of adverse weather that has impacted sugarcane production, and the Brazilian government's preference for artificially holding down gasoline prices as a way to help control inflation. When gasoline prices are held down, the result is depressed ethanol prices as well.
There are no new sugar mills expected to come online in Brazil in the near future and it remains to be seen if the financial environment will be conductive for the construction of the needed new sugar mills.