Cosan underlined the strategy among Brazilian sugar
producers of stockpiling supplies, in the hope of higher prices, as rival Sao
Marthinho forecast a drop of at least 10% in its cane yield thanks to drought.
Cosan, Brazil's top sugar and ethanol producer, said that
its production of the sweetener during the April-to-June quarter rose 13.7% to
The rise reflected a 13.0% increase in the volumes of cane
crushed at its sugar and ethanol division, Raizen Energia, coupled with a higher
concentration of sugars in the crop, lifted by the early-2014 drought.
However, the volume of sugar sold tumbled 23%, driving
revenues for the sweetener down 23% to R$582.8m.
"The main factor driving this reduction in net revenue from
sugar sales was the postponement of shipments to the end of the 2014-15 harvest,"
the group said.
Inventories as of the end of June were, at 800,000 tonnes, 84%
higher than a year before.
The increase reflects expectations among Brazilian sugar producers
that current prices, which on Wednesday fell below 16.00 cents a pound on New
York's Ice exchange for the first time in five months, are unsustainably low,
given the prospect of a drought-shortened cane harvest.
While cane crush volumes have risen in Brazil's Centre
South, responsible for some 90% of the country's sugar output, that is down to
dry conditions, which speed harvest, rather than strong yields.
Indeed, Cosan reported a drop of 8.1% to 79.5 tonnes per
hectare in cane yields during the April-to-June quarter.
Separately, rival sugar and ethanol producer Sao Martinho,
which itself reported an increase in cane yields during the quarter to 93.3
tonnes per hectare, said that the rise would prove temporary.
"In the 2013-14 crop year, TCH [tonnes of cane per hectare]
was close to 100, and this year it should drop to something close to 90, or even
a little less than 90," Sao Martinho spokesman Felipe Vicchiato told investors, discussing the group's own results for the quarter.
"Now this year [TCH] will be 10% less at least."
With Centre South mills crushing more cane, harvested at
lower yields, mathematics suggest that supplies will run out earlier than would
have been expected in a normal season –
a prospect being termed "sudden death" in Brazil.
"If we didn't have this long, dry season, most probably the
Sao Martinho group would have a surplus of sugar cane, and would have to once
again leave cane unharvested to be crushed in the next season," Mr Vicchiato said.
Sao Martinho earlier this week highlighted that it too is
stockpiling sugar, in expectation of the early finish to the Centre South cane
harvest spurring higher prices.
The harvest, which starts in April, typically stretches into
November-December, before a seasonally rainy period.
Cosan's Raízen Energia division achieved a 14.1% rise to R$1.69bn
in revenues in the April-to-June period despite the drop in sugar sales.
Sales of ethanol soared 51%, and of electricity generated
from cane waste by 80%.
The division's earnings before interest, tax, depreciation
and amortisation (ebitda) rose by 15.8% to R$478.3m.
At a group level, earnings hit R$104.1m, compared with a
loss of R$201.5m a year before, on revenues up 0.9% at R$2.25bn.