Brazil. Sugar Annual. Apr 2013 May 9, 2013
This report updates BR12014. Brazil’s MY 2013/14 sugarcane crop is forecast at 640 mmt, up 48.9 mmt from the previous season (591.1 mmt). Approximately 48 percent of the crop should be diverted to sugar, down 2 percentage points compared to MY 2012/13. Total exports for MY 2013/14 are forecast at 29.3 mmt, raw value, up 1.65 mmt relatively to the previous marketing year.
The Agricultural Trade Office (ATO/Sao Paulo) projects the marketing year (MY) 2013/14 Brazilian sugarcane production at 640 million metric tons (mmt), up 8 percent from the previous season (591.1 mmt). The center-south (CS) region is expected to harvest 585 mmt of sugarcane, a 10 percent increase relative the previous crop (532.6 mmt), due to expected higher agricultural yields as a result of good weather conditions and adequate renewal of sugarcane stocks. ATO/Sao Paulo forecasts the North-Northeastern (NNE) production for MY 2013/14 at 55 mmt, down 3.5 mmt from the revised figure for MY 2012/13 (58.5 mmt) due to weather related problems (drought) that affected growing regions.
The crushing period has already begun. Total sugarcane area for MY 2013/14 is projected at 9.8 million hectares (ha), up 50,000 ha from previous season.
The industrial yield for MY 2013/14 is forecast at 136.44 kg of TRS (total reducing sugars)/mt, up 1.15 kg compared to MY 2012/13 (135.29 kg TRS/mt).
Sugar and Ethanol
For MY 2013/14 total sucrose (total reducing sugar, TRS) content diverted for sugar and ethanol production is forecast at 48 and 52 percent, respectively, as opposed to an equal split of 50/50, respectively for MY 2012/13. Sugar-ethanol mills are likely to increase ethanol production due to an expected increase in the ethanol content blended with gasoline. Additionally, the international sugar market has not been particularly attractive compared to previous seasons.
For MY 2013/14 sugar production is projected at 40.4 mmt, raw value, up 1.8 mmt compared to MY 2012/13 (38.6 mmt). The CS states should account for 36.35 mmt, raw value, up 5 percentfrom MY 2012/13 (34.4 mmt). The NNE should account for 4.05 mmt of sugar, raw value, similar to MY 2012/13 (4.2 mmt).
Total ethanol production in MY 2013/14 is forecast at 26.82 billion liters (12.55 billion liters of anhydrous ethanol and 14.27 billion liters of hydrated ethanol). The sugar-ethanol sector should prioritize the production of anhydrous ethanol to comply with the ethanol mandate set by the Brazilian government.
Sales of FFV currently represent close to 90 percent of total vehicle sales.
The steady sales of flex-fuel vehicles do not solely guarantee a higher demand for ethanol given that consumers’ decisions are driven by the ratio between ethanol and gasoline prices. The 70 percent ratio between ethanol and gasoline prices is the rule of thumb in determining whether flex car owners will choose to fill up with ethanol (price ratio below 70 percent) or gasoline (price ratio above 70 percent).
Due to higher ethanol prices during the offseason (January-February 2013), gasoline consumption was favored in several Brazilian states, except Sao Paulo, thus reducing ethanol demand during the off-season.
According to the Ministry of Agriculture, Livestock and Supply (MAPA), cumulative ethanol production for the 2012/13 crop through February 28, 2013 was reported at 23.35 billion liters – 9.65 billion liters of anhydrous ethanol and 13.7 liters of hydrated ethanol.
Sugarcane, sugar and ethanol prices in the Domestic Market
The State of Sao Paulo Sugarcane, Sugar and Alcohol Growers Council (CONSECANA) reports that the average sugarcane price (April 2012-March 2013) for the state of Sao Paulo for the 2012/13 crop was reais (R$) 0.4728 per kg of TRS, or R$63.97 per ton of sugarcane, down R$ 4.57 per ton compared to the 2011/12 crop (R$0.5018 per kg of TRS, or R$68.54 per ton of sugarcane), due to lower industrial yield and lower prices paid for sugar and ethanol during the crushing season compared the previous year. Note that CONSECANA’s prices are based on both sugar and ethanol prices in domestic and international markets.
During MY 2013/14, ATO/Sao Paulo projects the Brazilian sugar consumption at 11.26 mmt, raw value, similar to MY 2012/13 (11.2 mmt), reflecting updated information from the sugar industry.
Brazilian sugar exports for MY 2013/14 are projected at 29.3 mmt, raw value, to meet projected international demand, representing a 1.65 mmt increase compared to the revised figure from 2012/13 (27.65 mmt) Raw sugar should account for 22.95 mmt, raw value, whereas the remainder represents exports of refined sugar.
Post forecasts total sugar ending stocks during MY 2013/14 at -695,000 mt, down 160,000 mt compared to the revised figure for MY 2012/13 -535,000 mt). Negative stocks have been balanced by the early start of crushing, March/April as opposed to May.
The current ethanol content blended to gasoline set at 20 percent will change to 25 percent as of May 1. GOB has recently announced the future reduction of the PIS/COFINS taxes and the social security contribution on income from sugar-ethanol mills. The PIS/CONFINS taxes should be close to zero, but not zero to guarantee that mills are allowed to use the taxes collected as credit for exports. The social security tax should drop from 2.57 percent to 1 percent. The announcement has not been published in the Brazilian official gazette, therefore it is still not effective.
In early March, the GOB also announced the reduction of federal taxes (PIS/COFINS and the Industrialized Product Tax –IPI) for several products of the basic food basket, including sugar