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Brazil Gets Record Sugarcane Harvest and Believes Sky Is the Limit

The strong foreign demand for sugar and ethanol has brought to Brazil a record sugarcane harvest. According to a study published Wednesday, January 4, by the National Food Supply Company (Conab), connected to the Brazilian Ministry of Agriculture, Livestock and Supply, production in the 2005/2006 crop should reach 436.8 million tons.

This is 5.1% more than in the previous harvest (2004/2005), and the expectations are that new records should be posted in coming harvests.

"The foreign sugar market is very demanding, and it is estimated that there is a deficit of 5 million tons," stated the sugar and alcohol sector analyst at the Conab, Paulo Morceli. "If Brazil had more to export, the foreign market would be receptive," he added.

Of the total crop, 216 million tons are being used for the production of sugar, which should result in 26.7 million tons of the product. Brazil is the largest world producer and exporter of the commodity, and the domestic market is stable at 9.5 million tons a year and exports at 17.5 million tons (estimated for the end of 2005). Foreign shipments totaled 15.8 million tons in 2004 and 12.9 million tons in 2003, according to Morceli.

The second main world producer of sugar is India, but the country’s production is equal to half the Brazilian. The main buyer of the Brazilian product is Russia. "The Arabs are also very interested, and it is a highly demanding market," stated the Conab specialist.

Fuel

Another 178.4 million tons of cane are being turned to the production of 17 billion liters of alcohol. According to Morceli, the demand for ethanol is growing on the foreign market as various countries are trying to replace MTBE (methyl tertiary-butyl ether), an oil product, as an oxygenate in gasoline.

This is due to the enactment of the Kyoto Protocol, which demands the reduction of the global emission of greenhouse gas, and an increase in oil prices.

As is the case with sugar, Brazil is the main producer of ethanol, followed by the United States. The US production, however, estimated at 16 billion liters, is close to the Brazilian. The main markets for Brazilian alcohol are India and the US. In 2004 Brazilian mills exported 1.9 billion liters of the product and expectations were for figures for the closing of 2005 to have reached 2.1 billion liters.

On the domestic front, Morceli recalls that dual fuel vehicles, which operate on alcohol, gasoline or any blend of both fuels, have become very popular among Brazilian consumers, increasing the demand for ethanol.

The increase in the demand for sugar and alcohol has caused an increased in the price of both products, attracting the interest of domestic and foreign investors to the sector.

There has been an increase in the area turned to sugarcane crops from one harvest to the next – from 5.6 million hectares to 5.9 million hectares – and new mills have been opened.

According to Morceli, this year, for example, at least another 15 production units should be opened, and they will be added to the 370 that are already in operation in the country.

"The sector is living an important moment, with domestic and foreign investments," stated Morceli. The new mills alone, to go into production in 2006, should use another 25 million tons of sugarcane.

This growing demand should guarantee new records in coming harvests. "And if Brazil is graced with becoming a large world supplier of alcohol, then the sky is the limit," he added.

Record, But Below Expectations

Although the 2005/2006 crop was record, it was below expectations. In an initial study, disclosed in May, the Conab had forecasted a crop of 450.2 million tons. The reduction, according to the Conab, was due to a drought in the large producer states in the Northeast of the country, in the southern state of Paraná and in the midwestern state of Mato Grosso do Sul.

The Center-South region of the country, however, is responsible for 85.7% of domestic sugarcane production, and the southeastern state of São Paulo is the main producer, with 265.5 million tons in the 2005/2006 crop. The Northern and Northeastern regions of the country answer to 14.3% of the total.

Anba – www.anba.com.br

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