April 2011 - Brazil Crush Begins amidst Higher Returns for Prompt Sugar and Ethanol

Record Brazil Crop Set to Return 11/12 Balance Sheet to a Surplus

The start of the 11/12 season in Brazil marks the beginning of the transition between the 10/11 and 11/12 crop cycles in the global balance sheet. Demand for new crop sugar from Brazil is typically high. However, this year with Brazil importing ethanol from the US and facing competition from Thai sugars in Asia, the fundamental drivers are changing. Although sugar prices remain high, this seems to be in contradiction to the shifts in the balance sheet and allocation of resources that is required in the year ahead. In this month's Review we have focused on the challenges facing Brazilian producers in the season ahead.

2011/12 Crop Expectations

  • Mills to start crushing to capture high returns from ethanol and sugar.
  • Czarnikow estimates a crush of 575m tonnes ahead of UNICA which forecasts the crush at 568.5m tonnes.
  • Prices favour sugar over ethanol and mills are expected to produce 35m tonnes this season; 25m tonnes for export.
  • Ethanol production is expected to rise by 0.5% with 17.5bn litres of hydrous and 8bn litres of anhydrous ethanol being produced.
  • Global sugar balance expected to return to surplus in 11/12 season.

The Ethanol Picture

  • High hydrous ethanol prices are hitting demand and consumers are turning to gasohol.
  • Producers facing pressure to focus on ethanol production, but with no incentives in place, hydrous ethanol set to continue to lose ground to gasohol.
  • Greater Government involvement in the regulation of the ethanol market as ANP assumes responsibility for regulating production.
  • Discussions over state taxes on ethanol could provide useful support for future investment in ethanol.

Toby Cohen, Czarnikow director, said: “With Brazil heading towards a record crush, and the possibility of a return to a global surplus, mills have every incentive to capture high early season returns. But operational pressures have delayed the start of the season in order to improve cane performance.”

Peter de Klerk, Czarnikow analyst, said: “We are expecting a new export record from Brazil this year, and the market will be hoping that recent infrastructure upgrades will prevent a repeat of last year’s physical log jam.”

 

 

Notes to Editors

For further information please contact:

Czarnikow
Toby Cohen
Peter de Klerk 020 7972 6600

Cubitt Consulting 0207 367 5100
Caroline Merrell
Fergus Brady

About Czarnikow:

Czarnikow Group is one of the most respected names in agricultural commodity markets and has been providing high quality market services since 1861. Czarnikow operates in three core areas; sugar, biofuels and corporate finance. Its success is built upon knowledge of the market, confidentiality, reliability and independence.

Czarnikow deals with around 10% of the 50 million tonnes of sugar that is traded annually, which means that it has a first hand presence in all major sugar markets of the world. Czarnikow works throughout the entire supply chain providing services to growers, millers, refiners, beet producers, traders, merchants and industrial users.

Czarnikow operates from a head office in London and a network of 10 regional offices to service clients and customers globally.