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Brazil Mills Likely To Delay Cane Harvest Due To Weather, Ethanol Stocks

Published on Feb 15 2019 11:30 AM in Supply Chain tagged: Brazil / Ethanol / Sugarcane / Trendig Posts

Brazil Mills Likely To Delay Cane Harvest Due To Weather, Ethanol Stocks

Mills in Brazil's centre-south are likely to start harvesting the new sugar cane crop later than usual to allow cane fields to take advantage of late rains while holding excess ethanol stocks after over-producing last year, analysts and millers said.

Brazil's 2019/20 cane crop in the main centre-south region officially starts in April, but mills normally enter fields in March, particularly to profit from better ethanol prices at the end of the inter-harvest period.

Biofuel Over Sugar

Ethanol stocks in the region are still at a near-record high, however, because of the mills' strategy last year to favour the biofuel over sugar.

Ethanol prices did not rise in the between-crops period as they historically do, further reducing the incentive for early harvesting.

Brazil's Sao Martinho, one of the largest companies in the sector, said around 38% of its annual ethanol output remains to be sold in the last quarter of the crop year, which runs from January to March.

'Higher Ethanol Prices'

"Our expectation was for higher ethanol prices in December, January and February, which didn't happen," said Felipe Vicchiato, the company's chief financial officer.

Brazil is the world's largest producer and exporter of sugar and the largest producer of cane-based ethanol, though it is second overall after the United States, which makes its ethanol from corn.

Matheus Costa, sugar and ethanol analyst at broker and consultancy INTL FCStone, also said Brazil's ethanol stocks remain high.

"If mills face difficulties to reduce those stocks, they could opt to produce more sugar than ethanol in the beginning of the new crop, or they could choose to delay the start of harvesting," he said.

Benefit From Recent Rains

Some companies, such as Louis Dreyfus-controlled Biosev, want to give cane fields time to benefit from recent rains, especially since precipitation was below average in December and January.

"We are having good rains now, and there is more expected for the rest of the month. Our plan is to not start crushing in March, only in April," Biosev's chief executive Juan José Blanchard told Reuters.

If rains continue into March, overall volumes for the new cane crop could improve even if mills delay processing.

Some analysts think the sugar market is already reacting to a possible delay in the new centre-south crop.

"The March-May spread (in New York) appreciated almost $5 in the last two weeks. What causes such a movement is the perception of a delay in the availability of sugar in the beginning of the crop," said Arnaldo Correa, a sugar and ethanol expert at Archer Consulting.

News by Reuters, edited by ESM. Click subscribe to sign up to ESM: European Supermarket Magazine.

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