Brazilian sugar and ethanol producers have started cane crushing for the new crop earlier than in the previous season, and are expected to produce more sugar and less ethanol, said consultancy and broker INTL FCStone on Wednesday.
It said in a note to clients that 33 mills were operational in the main center-south region in the first half of March, 22% more than in the year-ago period. Brazil’s Centre South crop starts officially in April, but some companies kick-off crushing earlier.
Brazil’s 2020-21 Centre South cane crop was projected by the broker at 597.8m tonnes, 1.4% larger than the 2019-20 season as favourable weather and a higher-than-normal renovation rate are seen boosting agricultural yields.
FCStone estimates sugar production in the new season at 33.1m tonnes versus 26.6m tonnes in the previous crop, as mills are seen allocating 42.1% of the cane to produce the sweetener compared to an all-time low of 34.1% in 2019-20.
It is the second time the consultancy increases the so-called sugar mix for the new crop. It said falling gasoline prices due to the coronavirus pandemic is helping to increase cane allocation for sugar production.
On Wednesday, Brazil’s state-controlled oil company Petrobras cut gasoline prices at the country’s refineries by 12%, the second major cut in a week.
Mills are expected to cut ethanol production by 8% in the new season, to 30.6bn litres. With lower gasoline prices, ethanol should lose competitiveness at pumps to the oil-based fuel.
FCStone estimated reduced global demand for sugar due to the pandemic, but said it still expected the world’s 2019-20 supply balance at a deficit of 8.6m tonnes.