USDA FAS: Brazilian sugarcane ethanol production expected higher, exports to drop
May 4, 2009
Web exclusive posted May 12, 2009, at 2:23 p.m. CST
In an April 30 Global Agriculture Information Network report on Brazilian sugar, the U.S. Agricultural Trade Office in Sao Paulo, Brazil, a service of the USDA Foreign Agricultural Service, said the sugarcane crush for the 2009/10 market year is expected to be higher due to continued expansion. Sugarcane ethanol production is forecasted higher while exports are expected to drop.
"Sugarcane for crushing for market year 2009/10 is projected at 605 million metric tons (mmt), up 7 percent from the previous year," the report said, "due to continuing area expansion. Sugar production is forecast to increase to 36.85 mmt, raw value. Sugar exports are forecast at 24.36 mmt, up 4.05 mmt from the previous year, due to expected lower supply from other producing countries such as India. Ethanol production for 2009/10 is forecast at 28.45 billion liters (7.52 billion gallons), while ethanol exports are expected to drop to 3.7 billion liters (977 million gallons).
"Dropping sugar and ethanol prices during 2007 and 2008 and the global financial crisis in September 2008 became a major obstacle to new investments in 2009 and 2010," the report continued "although investments in the sugar-ethanol sector had been growing steadily during the last few years. (Financing from the National Bank for Economic and Social Development - BNDES, the major federal bank funding new projects, increased from R$3.56 billion in 2007 to R$6.5 billion in 2008.) Credit has become scarce, to fund both sugar export operations and investments in new mills. The industry estimates that total credit to finance investments should drop from R$12 billion in 2008 to R$7 billion or less in 2009. Approximately 40 percent of the mills that were supposed to start running in 2009 (35 mills) have already postponed operations until 2010.
"The 2009/10 sugarcane crop is expected to break the trend of increased percentage of sugarcane toward ethanol production, as opposed to sugar," the report said. "Sugarcane for sugar, which dropped from 49.5 percent of the crop in 2006/07 to 40.4 percent in 2008/09, is expected to rebound to 42.5 percent in MY 2009/10. Thus, the TRS breakdown for sugar and ethanol production is forecast at 42.5 : 57.5 percent, respectively, compared to 40.4 : 59.6 percent for 2009/10.
"Total ethanol production for 2009/10 is projected at 28.45 billion liters (7.52 billion gallons), 8.5 billion liters (2.25 billion gallons) of anhydrous ethanol and 19.95 billion liters (5.27 billion gallons) of hydrated ethanol," the report continued, "up 1.25 billion liters (330 million gallons) from 2008/09, 9.35 billion liters (2.47 billion gallons) of anhydrous ethanol and 17.85 billion liters (4.72 billion gallons) of hydrated ethanol, pushed by expected higher ethanol consumption. In spite of the world financial crisis, the domestic demand for ethanol for 2009/10 is expected to increase to 24.5 billion liters (6.47 billion gallons), up 2.45 billion liters (647 million gallons) from 2008/09, due to sales of flex vehicle cars and attractive ethanol prices vis-à-vis gasoline.
"The steady sales of flex-fuel vehicles do not guarantee a higher demand for ethanol since consumers' decisions are driven by the ratio between ethanol and gasoline prices," the report said. "A 70 percent ratio between ethanol and gasoline prices is generally accepted as determining whether flex car owners will choose to fill up with ethanol (price ratio below 70 percent) or gasoline (price ratio above 70 percent).
"According to the Ministry of Agriculture, Livestock and Supply, cumulative ethanol production for the 2008/09 crop through February 16, 2009 was reported at 26.9 billion liters (7.1 billion gallons)—9.5 billion liters (2.5 billion gallons) of anhydrous ethanol and 17.4 billion liters (4.6 billion gallons) of hydrated ethanol," the report continued.
"Brazilian ethanol exports for 2009/10 are forecast at 3.7 billion liters (977 million gallons), a 1.35 billion liter (357 million gallons) reduction compared to 2008/09 (5.05 billion liters, 1.33 billion gallons)," the report said, "mostly due to an expected decrease in direct exports to the U.S. Note that over 50 percent of total Brazilian exports for 2008/09 were shipped to the U.S. either directly (encouraged by high ethanol prices in the U.S.) or through the Caribbean Basin Initiative countries."
In an April 30 Global Agriculture Information Network report on Brazilian sugar, the U.S. Agricultural Trade Office in Sao Paulo, Brazil, a service of the USDA Foreign Agricultural Service, said the sugarcane crush for the 2009/10 market year is expected to be higher due to continued expansion. Sugarcane ethanol production is forecasted higher while exports are expected to drop.
"Sugarcane for crushing for market year 2009/10 is projected at 605 million metric tons (mmt), up 7 percent from the previous year," the report said, "due to continuing area expansion. Sugar production is forecast to increase to 36.85 mmt, raw value. Sugar exports are forecast at 24.36 mmt, up 4.05 mmt from the previous year, due to expected lower supply from other producing countries such as India. Ethanol production for 2009/10 is forecast at 28.45 billion liters (7.52 billion gallons), while ethanol exports are expected to drop to 3.7 billion liters (977 million gallons).
"Dropping sugar and ethanol prices during 2007 and 2008 and the global financial crisis in September 2008 became a major obstacle to new investments in 2009 and 2010," the report continued "although investments in the sugar-ethanol sector had been growing steadily during the last few years. (Financing from the National Bank for Economic and Social Development - BNDES, the major federal bank funding new projects, increased from R$3.56 billion in 2007 to R$6.5 billion in 2008.) Credit has become scarce, to fund both sugar export operations and investments in new mills. The industry estimates that total credit to finance investments should drop from R$12 billion in 2008 to R$7 billion or less in 2009. Approximately 40 percent of the mills that were supposed to start running in 2009 (35 mills) have already postponed operations until 2010.
"The 2009/10 sugarcane crop is expected to break the trend of increased percentage of sugarcane toward ethanol production, as opposed to sugar," the report said. "Sugarcane for sugar, which dropped from 49.5 percent of the crop in 2006/07 to 40.4 percent in 2008/09, is expected to rebound to 42.5 percent in MY 2009/10. Thus, the TRS breakdown for sugar and ethanol production is forecast at 42.5 : 57.5 percent, respectively, compared to 40.4 : 59.6 percent for 2009/10.
"Total ethanol production for 2009/10 is projected at 28.45 billion liters (7.52 billion gallons), 8.5 billion liters (2.25 billion gallons) of anhydrous ethanol and 19.95 billion liters (5.27 billion gallons) of hydrated ethanol," the report continued, "up 1.25 billion liters (330 million gallons) from 2008/09, 9.35 billion liters (2.47 billion gallons) of anhydrous ethanol and 17.85 billion liters (4.72 billion gallons) of hydrated ethanol, pushed by expected higher ethanol consumption. In spite of the world financial crisis, the domestic demand for ethanol for 2009/10 is expected to increase to 24.5 billion liters (6.47 billion gallons), up 2.45 billion liters (647 million gallons) from 2008/09, due to sales of flex vehicle cars and attractive ethanol prices vis-à-vis gasoline.
"The steady sales of flex-fuel vehicles do not guarantee a higher demand for ethanol since consumers' decisions are driven by the ratio between ethanol and gasoline prices," the report said. "A 70 percent ratio between ethanol and gasoline prices is generally accepted as determining whether flex car owners will choose to fill up with ethanol (price ratio below 70 percent) or gasoline (price ratio above 70 percent).
"According to the Ministry of Agriculture, Livestock and Supply, cumulative ethanol production for the 2008/09 crop through February 16, 2009 was reported at 26.9 billion liters (7.1 billion gallons)—9.5 billion liters (2.5 billion gallons) of anhydrous ethanol and 17.4 billion liters (4.6 billion gallons) of hydrated ethanol," the report continued.
"Brazilian ethanol exports for 2009/10 are forecast at 3.7 billion liters (977 million gallons), a 1.35 billion liter (357 million gallons) reduction compared to 2008/09 (5.05 billion liters, 1.33 billion gallons)," the report said, "mostly due to an expected decrease in direct exports to the U.S. Note that over 50 percent of total Brazilian exports for 2008/09 were shipped to the U.S. either directly (encouraged by high ethanol prices in the U.S.) or through the Caribbean Basin Initiative countries."
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