After a decade of frenzied expansion and investment, the decade that followed proved much more challenging for the Brazilian sugar and ethanol sector. Since the global financial crisis of 2008, the sector had to contend with significant credit restrictions and many firms in the sugarcane sector were caught with high levels of debt, shifting the focus from greenfield projects to consolidation.
As a consequence of this period of stagnation, several firms have had to trim their investments and expenditures in order to preserve their balance sheet. This has led to much slower growth in cane areas, lower cane field renovation rates, and reduced agricultural productivity. The sharp recovery in world sugar prices in 2016 and early 2017 brought some breathing room to the sector, but the recent turnaround in prices owing to an anticipated world sugar surplus (which is expected to be extended through to the next season) and record output in other countries is, once again, proving worrisome.
There are, however, positive recent developments that may aid the Brazilian sugar and ethanol sector to escape its predicament. After undergoing a period of political crises and recession, the country is poised to resume GDP growth. Increased ethanol production is anticipated for the short term – and may extend to the medium term depending on the new National Biofuels Policy - RenovaBio.
Key to its success is restoring the health of the milling industry by triggering an increase of asset values in the mill sector, prompting further consolidation and new greenfield projects. If it is able to do so - and if the industry can be persuaded to invest hefty sums to meet the projected additional demand for ethanol - the next decade can surely be one of renewed interest and prosperity for the sector. The ISO forecasts cane areas and yields to improve, with cane production going from its current 640 mln tonnes to 765 mln tonnes in 2028. The boost to ethanol demand will bring production to 37.7 bln litres, compared to 26.7 currently. Once ethanol demand is met, sugar output is expected to reach 42.4 mln tonnes in 2028, leaving a net exportable surplus of 30.5 mln tonnes.
INTRODUCTION
1. THE BRAZILIAN SUGAR AND ETHANOL INDUSTRY
1.1 Snapshot and importance of the sector
1.2 Industrial Production
Top producers and developments
2. SUGARCANE PRODUCTION
2.1 Sugar Cane Production and Areas
2.2 Agricultural Yields
2.3 Costs of Production
2.4 Sugar Cane Prices
2.5 Brazilian Exports of Sugar
Infrastructure and logistics
Exchange rates and competitiveness
3. BRAZIL’S ETHANOL MARKET
3.1 Ethanol Balance, policy and taxation
3.2 RenovaBio – a new National Biofuels Policy
3.3 Global Trade of Ethanol
4. COGENERATION OF ENERGY FROM SUGARCANE BAGASSE
5. BRAZIL’S SUGAR/ETHANOL SUPPLY AND EXPORTS TO 2028 AND OUTLOOK
6. CONCLUSIONS