Betting on Ethanol, Brazilian Mills Turn Sour on Sugar
by Ana Ionova and Marcelo Teixeira (Reuters) Brazilian sugar companies are increasing their capacity to produce ethanol in the face of depressed global sugar prices and government policies expected to boost demand for the biofuel.
A shift to ethanol in the 2018-19 season slashed Brazil’s sugar output by 9 million tonnes to a 12-year low and more switching to the biofuel next season could help to wipe out a global surplus weighing on sugar prices.
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For Brazilian sugar cane processors, switching to ethanol has proved an attractive trade-off as the increased focus on the biofuel partly shielded mills from a plunge in global sugar prices in September to their lowest since 2008.
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Biosev, for example, Brazil’s second largest cane processor, said it was installing distillation columns at two plants in the Mato Grosso do Sul cluster to give the mills the option of using 90 percent of their cane for ethanol, up from 50 percent now.
In another sign the industry is making a longer-term bet on ethanol in step with Brazil’s biofuels policy, JW, a leading Brazilian ethanol equipment maker, told Reuters it has hired 200 people to cope with a surge in orders.
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So-called flex-fuel cars that run on pure ethanol or a gasoline-ethanol blend now make up 80 percent of Brazil’s light vehicle fleet.
In a new push, the government this year approved a program called RenovaBio that mandates fuel distributors to gradually increase the amount of biofuels they sell from 2020.
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Usina Coruripe, a top 10 Brazilian cane processor, said it plans to invest about 300 million reais ($79 million) to crush more cane and increase its ethanol capacity.
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“We almost doubled hydrous ethanol production from last year to this,” Luiz Gustavo Junqueira, innovation manager at Usina Batatais, told Reuters.
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Mills are also investing in storage tanks so they can hold onto ethanol and sell it when prices are higher, said Alexandre Figliolino, a former investment banker now advising sugar and ethanol companies.
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It is also unclear whether Brazil’s incoming president, Jair Bolsonaro, will maintain the policy of aligning domestic fuel prices with global prices. While it has improved the competitiveness of ethanol by removing price caps on gasoline, higher prices at the pump have angered many Brazilians. READ MORE
