APLA ’12: Brazil sugarcane crop to remain flat until 2014

12 November 2012 19:19  [Source: ICIS news]

(ICIS)--Brazil’s centre-south sugarcane production will remain mostly flat until 2014, a market source predicted on Monday, claiming the country continues to subsidise the price of gasoline, which in turn hurts profitability for sugarcane mills.

Gasoline prices can impact sugarcane profitability because they put a cap on the price of hydrous ethanol, which  is used in Brazil as a stand-alone fuel, competing directly with gasoline.

Around one-half of Brazil’s sugarcane production is used as a feedstock for ethanol.

Ethanol makers in Brazil have long complained about what they claim is the country's longstanding policy of controlling the price of gasoline to keep inflation in check.

The strategy limits how much ethanol prices can rise, discouraging investments to increase sugarcane production, a market source said on the sidelines of the Latin American Petrochemical Association (APLA) annual meeting.

Brazil sugarcane production fell by 1% from April to 1 November, according to the latest figures from sugarcane association Unica, but the group expects production to rise by 5% once this year’s centre-south harvest is completed.

The centre-south harvest runs from April to November/December. The area accounts for 90% of Brazil’s ethanol production.

Centre-south sugarcane production is expected to reach 518.5m tonnes for the 2012-2013 crop year, up from the 493.2m tonnes produced in 2011-2012, according to Unica.

Despite the increase, sugarcane production in the centre-south is still down by 6.9% from 556.9m tonnes produced in the 2010-2011 crop year.

The APLA conference ends on Tuesday.

($1 = €0.79)

By: William Lemos
+1 713 525 2653

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