The sugar-cane crop in Brazil’s center south, the main growing region of the world’s biggest producer, may climb 60 million to 65 million metric tons in the season that starts there in April, according to Kingsman SA.
The crop in the current season will be 512 million tons, the Lausanne, Switzerland-based researcher estimates. Rains are helping plantings for 2013-14, founder Jonathan Kingsman said today in an interview at the company’s event during London Sugar Week. Kingsman’s last forecast for the next crop was 538 million tons, and the company will revise the figure next week to take into account a new crop survey.
“The recent rains have helped plantings, have helped the crop for next year,” said Kingsman, a former Cargill Inc. employee who has worked in sugar for more than three decades. “I wouldn’t be surprised if it was 575 million tons.”
Millers in Brazil are likely to increase ethanol output next year because of rising consumption and limited capacity to make sugar, Kingsman said. Demand for Brazilian anhydrous ethanol, used to blend into gasoline, will rise by 2.5 billion to 3 billion liters (660 million to 792 million gallons), he said. Brazil’s ethanol exports to the U.S. will expand by 1.3 billion to 1.5 billion liters, Kingsman estimates.
“What you will see next year is more demand for anhydrous,” he said. “This is coming from two fronts. First of all, the move to 25 percent from 20 percent on the domestic blend in Brazil and the other one is the renewable fuels mandate from the U.S.”
The Brazilian government is considering raising the mandatory amount of ethanol blended into gasoline back to 25 percent. Brazil cut the ethanol blend to 20 percent last October after prices of the renewable fuel rose following a poor cane harvest.
An increase in demand for anhydrous ethanol is more likely to affect supplies of the hydrous variety, used in flex-fuel cars, than that of sugar, according to Kingsman. Brazil is more likely to de-hydrate hydrous ethanol to make it into anhydrous than to take supplies away from sugar, he said.
“Sugar at the moment pays more, so they will be maximizing sugar,” Kingsman said. “Next year, on the forward curve, it’s still sugar that pays the most.”
Raw sugar traded in New York has declined 15 percent this year to 19.81 cents a pound as supplies are set to outpace consumption for a third year. Sugar prices need to fall below 16-17 cents a pound before millers in Brazil favor ethanol at the expense of the sweetener.
“If we go down below that level, we lose 6 million to 7 million tons of sugar, which would mean that the world is balanced, there is no surplus, so producers don’t feel any need to sell under 19 cents a pound,” Kingsman said.
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