São Paulo – Investment in sugarcane production for ethanol and sugar is dropping and should progress even slower in coming years. According to the president at Datagro, Plinio Nastari, two years ago, an estimated 35 new mills were opened in Brazil each year. In 2010, just 12 new mills should start operating, and in 2011, between nine and ten, according to the executive.
Nastari spoke during the Datagro International Conference on Sugar and Ethanol, which began on Monday (18) and ends on Tuesday (19), in São Paulo. Datagro is a consultancy company in the sugar and alcohol sector and promotes the meeting each year. According to Nastari, the lesser number of mills to enter production is due to the fact that the sector is more concentrated. "Decisions for expansion are more efficient," he said. He also recalls that appreciation of the Brazilian real against the dollar makes investment more expensive.
However, foreigners should continue betting on Brazilian sugar and ethanol production and expanding their share in the sector in the country. Currently, foreign participation is 23.3%. And it should rise to 37% in five years, according to Nastari. "We have no government intervention, we are a competitive sector with rising demand," said the consultant, explaining the attraction of foreign capital. The greater international participation should be due both to the expansion of foreign groups already operating in the country and to the entry of new groups.
At the meeting on Monday, topics discussed included the scenery for production of sugarcane, ethanol and sugar in the country. The current sugarcane crop should reach 574.88 million tonnes in the Centre-South region of the country, according to estimates by Datagro, against a forecast of 578.8 million tonnes in September. The lack of rain from May to September was the main cause for reduction of the estimate. Rains in late September also hindered the grinding.
Production of sugar should total 34.32 million tonnes in the 2010/2011 crop, whereas ethanol production should reach 27.84 billion litres. In this crop and the next, producers should privilege production of sugar, not ethanol, due to the elevated global demand for the commodity, which is keeping prices on the rise. Currently, for example, there is a queue of 45 ships for sugar transport waiting to be loaded, said Nastari. "With sugar generating such much higher revenues than alcohol, everyone is expanding production," said the Datagro president.
According to Nastari, sugar prices should continue "sustainable" until a glimpse is reached as to what is going to take place in 2012. The sugarcane crop next year is also uncertain, and may vary 5% either way, greater or smaller than the 2010/2011 crop, according to Datagro forecasts. The variation should depend on the climate, mainly on rains between October this year and March next year. "If in late March it is still raining, if it rains in April, then there may be even greater reduction," explained Nastari. Climate forecasts show that the La Niña phenomenon, which generates excessive rains in the Southeast, should continue up to 2011.
With such attractive sugar production, the forecast is that ethanol prices should rise on the domestic market next year, reaching its limit value to remain competitive as against petrol. Ethanol exports should remain sustainable or drop a little next year as against this year, due to the priority granted to sugar producers. In the current crop, 2010/2011, exports should reach 1.72 billion litres of ethanol.
*Translated by Mark Ament
