RSS
Twitter
Linked In
News In
News
Linked In
RSS
https://twitter.com/Agrimoney
http://www.newsnow.co.uk/h/Industry+Sectors/Agriculture

You are viewing 1 of your 2 complimentary articles.

Register now to receive full access.

Already registered?

Login | Join us now

Brazilian cane mills will still favour sugar over ethanol next season

Twitter Linkedin

Brazilian ethanol production will fall in the coming season, as pricing continues to encourage cane crushers to produce sugar instead, think tank Cepea said.

"The ethanol market started in 2017 in a slightly encouraging scenario, given the higher prices obtained by the mills last year," said Cepea.

But the think tank said that dynamics for the sugar year, which official starts in April, still favoured sugar production, particularly after a shift in Brazilian tax policy.

Lower domestic fuel ethanol demand

Ethanol production in Brazil was down in the 2016-17 season, as high sugar prices and competitive gasoline meant cane mills favoured sweetener production over fuel.

Cepea said the production of hydrous ethanol, which is used domestically in Brazil's large fleet of flex-fuelled vehicles, was likely to fall further in 2017-18.

In part this is down to the fact that a tax-incentive scheme, in place since 2013, as allowed to lapse at the end of 2016, leaving hydrous ethanol even less competitive against gasoline.

But Cepea said that production of anhydrous ethanol, which is mostly exported to be blended into gasoline, and used in conventional vehicles, would rise.

Limited capacity

"In the 2017-18 crop year, agents should continue to allocate a good portion of sugarcane to sugar production instead of hydrated ethanol, given the greater profitability of the sweetener," Cepea said.

But the think tanked noted that practical factors would limit to the extent to which mills could switch away from ethanol to sugar.

"The capacity of sugar production in the mills in 2017-18 should grow due to investments made for this purpose, but not so markedly," Cepea said.

Coming deficit

Cepea was upbeat on sugar prices in the coming season.

"Prices in the Brazilian market for sugar should continue to rise during 2017, supported mainly by estimates of the world's coming world sugar deficit".

"Despite the slight rebound projected in global 2016-17 production, up from 3% over the previous season, totalling 171m tonnes, the volume should not be sufficient to meet demand, estimated at 174m tonnes

Eyes on the mix

Falling ethanol production is bad news for sugar bulls, as the Brazilian ethanol mix is one of the key uncertainties for this year.

"It is increasingly clear that the only major factor which causes supply to increase/decrease as prices rise/fall, is the ethanol parity in Brazil," said broker Marex Spectron.

Marex Spectron noted a theory that "when sugar is in clear surplus, the ethanol parity serves as a ceiling, and when sugar is in clear deficit, the ethanol parity serves as a floor".

The broker noted that swings in the sugar mix could account for as much as 6m tonnes of sugar added or removed from the balance sheet.

By Agrimoney.com

Twitter Linkedin
Related Stories

Evening markets: South American double whammy brings ags back down to earth

Ags lose early gains, undermined by a tumble in Brazil’s real, and falling rain in Argentina. Still, wheat futures remain in positive territory

Can cotton prices extend their rally?

History suggests futures will not stay long in the 70s cents a pound. So which way will they trend?

Morning markets: Hard wheat regains premium over soft, amid US dryness worries

Kansas City wheat outperforms, as Plains precipitation worries extend to a dearth of snow cover. But Kuala Lumpur palm oil hits a 16-month low

Evening markets: Ags gain, as funds begin to get that year-end festive mood

Ag prices recover, helped by the likes of more positive comment on US export competitiveness, and some more negative talk on Argentine rains
Home | About | RSS | Commodities | Companies | Markets | Legal disclaimer | Privacy policy | Contact

Our Brands: Comtell | Feedinfo | FGInsight

© Agrimoney.com 2017

Agrimoney.com and Agrimoney are trademarks of Agrimoney Ltd
Agrimoney is part of the Briefing Media group
Agrimoney Ltd is registered in England & Wales. Registered number: 09239069