Brazil's elections, besides the "sudden death" to cane
volumes, offer late-year hope for a revival in sugar
prices, in opening the way for a rise in fuel values which would divert more
cane to making ethanol.
Plinio Nastari, president of Datagro, backed expectations of
an early finish to the cane crushing season in Brazil's Centre South region
thanks to damage to the crop from a persistent rain shortfall, a dynamic which
many commentators have said should support sugar values.
"Cane crushed in October to December last year will not be
ready for harvesting this year," he said.
"We are going to have a crop with a sudden death, with a
sudden reduction in crushing in cane around September."
Mr Nastari restated a forecast that the Centre South, which
accounts for 90% of Brazil's cane and sugar output, will produce 560.5m tonnes
of cane in 2014-15, which started in April, down from 596m tonnes last year,
Sugar output will fall to 32.3m tonnes from 34.29m tonnes
However, Brazil's elections will act as a support to sugar values
too, in heralding an end to the government's "nonsense policy" of limiting
gasoline prices, currently at levels 18% below world levels, in a drive to
control inflation, with knock-on effects for ethanol values too.
This "distortive" regime "is the main reason for the crisis
in Brazil's cane industry", which has seen 66 mills close since 2008, Mr Nastari
told the Sugar and Ethanol Summit in London.
"Brazil has become dependent on imports of gasoline, which is
quite odd," given its potential for cane-derived ethanol.
With the elections out of the way, a "gasoline price
correction is expected to happen", which will open the way for higher prices of
ethanol and, in turn, sugar.
"We see a correction in the price of ethanol first. Sugar will
follow ethanol," he said.
Indeed, ethanol, as first to see price rise, will attract an
increased proportion of cane in 2015-16, taking share from sugar, which is currently
proving unexpectedly popular for mills, in part thanks to ideas of higher
Mr Nastari acknowledged that it was not a certainty that,
after October's election, the next government will allow gasoline prices to
But he termed the current policy as "completely
unsustainable", an opinion supported by Luis Pogetti, president of Copersucar,
the Brazilian sugar giant responsible for some 140m tonnes of cane processing a
"Everyone in Brazil" expects a change, Mr Pogetti told the
conference, adding that the policy was a "problem" for Petrobas, the state
backed oil group which is forced to swallow heavy losses thanks to the discount of Brazil's regulated gasoline
price compared with the international average.
"It cannot survive without some correction in price," he