MECAS (12) 05 - Outlook of Sugar and Ethanol Production in Brazil - English

Outlook of Sugar and Ethanol
Production in Brazil
March 2012
MECAS(12)05
International Sugar Organization
ISO
Outlook of Sugar and Ethanol Production in Brazil

MECAS(12)05
MARCH 2012
Market Evaluation Consumption and

Statistics Commitee
The Outlook of Sugar and Ethanol Production in Brazil
30th March 2012
Abstract
Brazil has the worlds largest and most diversified sugarcane processing industry
and is the leading producer of sugar and cane-based ethanol. The country had
the fastest growing sugar industry in the 90s and the first decade of the 2000s.
Indeed, Brazils share in world sugar production and exports increased from 7%
and 6% in 1990 to an impressive 25% and 50% in 2010. Since 2009, the last
time the ISO published a paper on Brazil (MECAS (09)06 on Outlook on Brazils
competitiveness in sugar and ethanol), Brazils frenzied expansion has come to
halt. The country has been grappling with a successive number of production
challenges, including falling agricultural yields, escalating production costs,
environmental obligations to speed up harvest mechanization, a strengthening
national currency and adverse weather, among others. On the industrial side, a
flurry of joint ventures and mergers and acquisitions has continued to reshape
the market shares of the leading players, but the focus has shifted to brownfield
rather than new greenfield mill investments.
This paper is structured into 5 parts. Part 1 presents the background as well as
Brazils sugar/ethanol output relative to world production. Part 2 assesses the
recent developments in Brazils cane sector, the drivers behind cane yield
performance, an assessment of cane production costs versus cane prices, and a
comparison of gross returns per hectare between cane and other major
competing crops like soybeans and maize. Part 3 of the paper presents the
recent developments in industrial cane crushing by group of mills, detailing the
market leaders and the role of foreign direct investment. This part also
elaborates on the economics behind the split of cane into sugar or ethanol. Part
4 of the paper examines the six major drivers impacting Brazils competitiveness
in sugar and ethanol in the world market, from production costs to diversification
into cogeneration and bioplastics. Part 5 of the paper assesses the outlook for
domestic and international demand for Brazils sugar and ethanol and presents a
forecast of supply and export growth to 2020.
The paper concludes that there are enough reasons to believe that the Brazilian
sugar/ethanol sector will continue to expand over the current decade, although
at a significantly lower rate of growth. The ISO projects that cane production
growth in Brazil is expected to average around 3% a year between 2010 and
2020, compared to 10% a year in the previous decade, taking cane output to
around 850 mln tonnes by 2020. This would be sufficient for Brazil to ensure that
around 20% of the projected light vehicle fleet runs on hydrous ethanol whilst at
the same time allowing the country to keep its current share in world sugar
production, resulting in ethanol production of 43.6 bln litres and sugar output of
47.5 mln tonnes in 2020.
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Table of Contents
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INTRODUCTION
PART 1: THE BRAZILIAN SUGAR/ETHANOL INDUSTRY
SNAPSHOT OF BRAZILS CANE/SUGAR/ETHANOL PRODUCTION
PART 2: CANE PRODUCTION
CANE AREA AND YIELDS

SUGAR CANE PRODUCTION COSTS
SUGAR CANE PRICES
PRICES OF OTHER CROPS AND SUGAR CANE COMPETITIVENESS
5
8
10
11
PART 3: INDUSTRIAL PROCESSING
13
LEADING MILLING GROUPS

THE NEW JOINT VENTURES INVOLVING FOREIGN GROUPS
SPLIT TO SUGAR AND ETHANOL
THE DILEMMA FACING THE LOCAL ETHANOL MARKET
GOVERNMENT POLICY AND TAXATION
13
16
17
19
21
PART 4: DRIVERS OF BRAZILS COMPETITIVENESS IN

THE WORLD MARKET
23
PRODUCTION COSTS
INFRASTRUCTURE AND TRADE LOGISTICS
INTERNATIONAL DEMAND FOR BRAZILIAN SUGAR
EXCHANGE RATE COMPETITIVENESS
THE WORLD FUEL ETHANOL MARKET
COGENERATION
BIOCHEMICALS AND OTHER TECHNOLOGIES
23
24
25
28
29
30
31
PART 5: BRAZILS SUGAR/ETHANOL SUPPLY AND

EXPORTS TO 2020 AND OUTLOOK
32
CONCLUSIONS
35
APPENDIX: PRODUCTION INDICATORS OF FOREIGN

GROUPS BY MILL
37
ii
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Introduction
Brazil has the worlds largest and most diversified sugarcane processing industry
and is the leading producer of sugar and cane-based ethanol. The country had
the fastest growing sugar industry in the 90s and the first decade of the 2000s.
Indeed, Brazils share in world production and exports increased from 7% and
6% in 1990 to an impressive 25% and 50% in 2010.
Since 2009, the last time the ISO published a paper on Brazil (MECAS (09)06 on
Outlook on Brazils competitiveness in sugar and ethanol), Brazils frenzied
expansion has come to halt. The country has been grappling with a successive
number of production challenges, including falling agricultural yields, escalating
production costs, environmental obligations to speed up harvest mechanization,
a strengthening national currency and adverse weather, among others. Whilst
between 2009 and 2010 cane output rose by 2.8%, down from an annual
average growth of 10% in the previous decade, last year cane production
slumped to the lowest level since 2007/08. Sugar production also fell last year by
an estimated 3 mln tonnes to 36 mln tonnes. Since Brazil is a price setter in the
world market, it is no surprise that Brazils wobbly performance is bullish for
world sugar market fundamentals.
This paper has the objective of reviewing the recent developments in Brazils
sugar cane production and processing sector as well as the drivers impacting
Brazils future competitiveness in the world market for sugar and ethanol. This
paper is structured into 5 parts. Part 1 presents the background of the industry
and status quo as well as Brazils sugar/ethanol output relative to world
production. Part 2 assesses the recent developments in Brazils cane sector, the
drivers behind cane yield performance, an assessment of cane production costs
versus cane prices, and a comparison of gross returns per hectare between cane
and other major competing crops like soybeans and maize. Part 3 of the paper
presents the recent developments in industrial cane crushing by group of mills,
detailing the market leaders, the recent restructuring of the industry through
joint ventures and mergers and acquisitions as well as the role of foreign direct
investment, including oil giants. This part also elaborates on the economics
behind the split of cane into sugar or ethanol, presenting the dilemma facing the
domestic ethanol market at the moment and finally the role of government policy
in prompting growth in the domestic market. Part 4 of the paper examines the
six major drivers impacting Brazils competitiveness in sugar and ethanol in the
world market, from production costs to diversification into cogeneration and
bioplastics. Part 5 of the paper assesses the outlook for domestic and
international demand for Brazils sugar and ethanol and presents a forecast for
supply and exports to 2020.
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Part 1: The Brazilian Sugar/Ethanol Industry

Snapshot of Brazils Cane/Sugar/Ethanol Production
Brazil has the worlds largest and most diversified sugarcane processing industry.
The vast majority of its sugar mills have integrated ethanol distilleries, allowing
cane to be processed into either sugar or ethanol. Since 1999/2000, the share of
industrial cane sucrose (known in Brazil as ATR, or Acar Total Recupervel)
allocated to sugar production has varied between 41% and 52% - see table 1.
Sucrose extraction from cane is allegedly high by world standards and has
averaged around 140kg/tonne of cane (or 14%) over the past 10 years. National
cane output doubled in the past decade, with annual growth of around 10%,
although it suffered a major contraction in 2011/12, when output fell from 620
mln tonnes to an estimated 562 mln tonnes, the lowest level since 2007/08.
Table 1 BRAZIL Industrial Cane Production (April/March), mln tonnes
Crop year
Total
cane
Total reducing
sugars (ATR)
Sucrose yield Share of ATR for

(ATR) in sugar production
kg/tonne of cane
(%)
Share of ATR for

ethanol
production (%)
1999/00 310.05
43.91
141.61
46.2%
53.8%
2000/01 255.90
35.19
137.53
48.0%
52.0%
2001/02 290.57
39.86
137.18
50.2%
49.8%
2002/03 322.37
45.64
141.57
52.1%
47.9%
2003/04 358.39
51.82
144.59
50.2%
49.8%
2004/05 386.74
54.74
141.55
51.1%
48.9%
2005/06 386.11
54.59
141.39
49.6%
50.4%
2006/07 426.29
62.10
145.69
50.5%
49.5%
2007/08 491.43
70.73
143.93
45.3%
54.7%
2008/09 572.67
80.33
140.28
41.3%
58.7%
2009/10 602.91
78.75
130.62
43.9%
56.1%
2010/11 619.53
86.64
139.85
45.9%
54.1%
2011/12 (e) 562.45
76.96
136.84
48.7%
51.3%
Source: ISO Ethanol Yearbook
Brazils sugar production and exports rose spectacularly in the two decades to
2010, consolidating the country as a world sugar market leader. As table 2
indicates, Brazils sugar production grew 5 times from 8 mln tonnes in 1990 to 39
mln tonnes in 2010, while sugar exports rose exponentially in the period from 1.6
mln tonnes to 28 mln tonnes, raw value. As a result, Brazils share in world
production and exports increased from 7% and 6% in 1990 to an impressive
25% and 50% in 2010. To put this into international perspective, the second
largest producer, India, has a 15% share in world production while the second
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largest exporter, Thailand, has a 12-15% share in world sugar exports. While
Brazils ethanol production from sugarcane also rose significantly between 1990
and 2010, from 12 bln litres to 27 bln litres, the countrys share in world ethanol
output has been declining (from 58% in 1990 to 26% in 2010), but this reflects
exceptionally high growth in corn ethanol production in the US.
During the first half of the past decade, fast rising international demand for high
quality VHP sugar by new destination refineries in the Middle East was the major
driver of Brazils cane supply growth. In the second half of the past decade, a
booming domestic market for ethanol aided by a high penetration of flexifuel
cars (running predominantly on hydrous ethanol), in addition to continuing high
import demand for sugar, boosted production growth further. During the peak of
the industry expansion between 2005 and 2009, 103 new mills, mostly focusing
on ethanol production, came onstream in the country, an average of over 20
new mills a year. Since 2010 the number of new mills has reduced to a trickle. In
2011, Brazils share in both world sugar production and exports declined and no
recovery is anticipated for 2012.
Table 2 - Sugar/Ethanol Production in Brazil as a share of World Output, (Sugar in mln tonnes,
raw value; ethanol in bln litres)
Year
1990
2000
2005
2010
2011(p)
Sugar Production
Brazil
World
8.0
16.5
28.1
39.0
36.0
110.8
130.0
140.7
156.7
170.0
Brazils
Share
7%
13%
20%
25%
21%
Sugar Exports
Brazil
World
1.6
6.5
18.4
28.0
25.6
28.4
36.5
48.0
55.5
53.0
Ethanol Production
Brazil's
Share
6%
18%
38%
50%
48%
Brazil
World
12
11
16
27
23
20
30
46
103
101
Brazil's
Share
58%
35%
35%
26%
23%
2011 figures are preliminary

Source: ISO
The latest assessment by Brazils Ministry of Agriculture (27 February 2012)

notes that Brazil today has a total of 414 sugar/ethanol mills in operation. Of this
total, 297 mills have integrated sugar/ethanol distilleries; while 104 make only
ethanol and 11 mills make only sugar (2 mills have unrecorded output).1 This
compares with a higher overall number of operating mills three years ago (of 13
March 2009) - 420 -, but a lower number of which- 248 - with integrated
mill/distilleries (157 were ethanol distilleries only). Four Centre-South states top
1
http://www.agricultura.gov.br/arq_editor/file/Desenvolvimento_Sustentavel/Agroenergia/Orientacoes_Tecn
icas/Usinas%20e%20Destilarias%20Cadastradas/DADOS_PRODUTORES_27_02_2012.pdf
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Statistics Commitee
the league of nationwide production units: So Paulo, with 184 mills, followed by
Minas Gerais, with 44 mills, Gois, with 33 mills and Paran, with 30. Although
still dominant, the share of So Paulo in production has declined over the recent
years while Gois and Minas Gerais (which are in the Cerrado region) have
gained market share. In 2009, So Paulo had 200 mills in operation, compared
with 37 in Minas Gerais, 33 in Paran and 27 in Gois. The next two largest
producing states are the North-Northeastern states of Alagoas and Pernambuco,
with 24 and 20 mills respectively.
While 9 new mills came onstream in 2010 and another 3 last year, many existing
mills are reported to have stopped crushing cane over the past couple of
seasons, largely for financial reasons. Datagro, Brazils largest sugar/ethanol
consultancy, estimates that 26 existing sugar mills will not operate in the
coming 2012/13 season, of which 12 are in So Paulo state, 4 in Minas Gerais, 4
in Rio de Janeiro, 2 in Alagoas, 2 in Gois, 1 in Tocantins and 1 in Cear.
Part 2: Cane Production

With 80% of the countrys mills, the Centre-South region has an almost 90%
share in cane production, up from 81% in 2000/01 - see table 3.
Table 3 BRAZIL Industrial Cane Production by Region (mln tonnes)
Centre-South
North-Northeast
C/S share in
(C/S)
(N/N)
countrys total (%)
2000/01
207.1
48.8
80.9%
2001/02
244.0
46.5
84.0%
2002/03
270.4
52.0
83.9%
2003/04
299.4
59.0
83.5%
2004/05
328.7
58.0
85.0%
2005/06
336.9
49.3
87.2%
2006/07
372.7
53.6
87.4%
2007/08
431.2
60.2
87.7%
2008/09
505.0
67.7
88.2%
2009/10
542.0
60.9
89.9%
2010/11
556.9
62.7
89.9%
2011/12 (e)
495.0
67.4
88.0%
Source: UNICA/Datagro/ISO Ethanol Yearbook
Almost all new production facilities opened in Brazil in the past decade are in the
Centre-South, which has a more suitable topography for cane growing and is
closer to the largest consuming markets. The average crushing capacity of a
Centre-South mill is over 2 mln tonnes, while in the North-Northeast an average
mill crushes just over 1 mln tonnes of cane a year. While the cane harvest in the
Centre-South takes place between April and December, in the North-Northeast
the bulk of the harvest is carried out between September to March, hence
Brazils national crop year running from April to March.
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Table 4 shows monthly industrial cane production in Brazil. The bulk of national
production happens between July and September, when monthly output can be
as high as 80 mln tonnes. Between January and March, which are the
interharvest months in the Centre-South, cane production rarely exceeds 10 mln
tonnes.
Table 4 BRAZIL Cane Production, monthly (thousand tonnes)
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Total
2003
2004
2005
2006
2007
2008
2009
2010
2011
9,325
3,830
800
14,261
38,731
45,984
50,593
49,484
49,929
48,610
30,336
11,490
8,307
6,043
4,620
10,778
30,040
44,554
50,338
56,495
56,183
50,897
45,792
23,116
11,791
5,358
1,398
16,299
44,513
49,711
54,199
56,153
49,462
51,770
35,301
14,797
11,383
1,949
573
19,818
50,584
55,869
60,190
58,482
54,304
53,675
42,750
13,965
9,583
4,919
2,150
20,868
53,394
62,666
59,565
69,704
68,883
64,527
48,325
23,913
7,541
7,358
4,681
22,996
56,745
65,743
74,965
70,435
73,068
74,238
67,020
38,099
17,000
7,879
4,486
44,453
67,053
67,414
72,387
71,905
66,900
75,313
66,631
36,383
15,213
16,053
3,208
59,000
75,681
81,349
84,389
83,343
71,364
66,309
53,919
21,171
9,580
7,294
6,133
24,872
76,253
77,118
85,449
81,246
81,930
57,653
38,169
14,118
353,371
387,165
390,750
423,541
488,499
562,889
597,802
630,999
559,815
The majority of cane is planted and harvested by the mills themselves, rather
than by independent growers. Not only do millers themselves own about two
thirds of the total area under cane, but some land is also leased by millers from
growers for cane production, taking the share of sugar mills in total cane
production to around 75%. Brazils largest independent cane growers
association is Orplana, the Organization of Cane Growers of Brazils CentreSouth. Orplana has 34 members representing 17 thousand producers accounting
for 125 mln tonnes of cane, or 25% of cane supply in the region.
Cane Area and Yields

Up to the 2009/10 season, the expansion in Brazils cane production was
correlated to increases in harvested area as well as by gains in agricultural yields.
The trend has changed in the past couple of seasons, where there has been a
significant decline in cane yields despite still positive growth in cane areas see
table 5. While industrial cane harvested area is estimated to have reached an alltime record in 2011/12 (April/March) at 8.2 mln ha, average cane yields in
2011/12 declined to a 10-year low of 68.9 tonnes/ha, down significantly from 80-
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81 tonnes/ha in the 2008/09 and 2009/10 harvests.2 Several reasons are linked
to this sudden and large decline in agricultural yields, breaking the long-term
growth pattern. First, bad weather resulting from El Nio and La Nia events
over the past few seasons have played a key role in this yield downgrade.
Second, lower rates of cane replanting and expansion into new areas, partly
attributed to low cash flow and lack of new greenfield plantations, but also due
to fast rising input costs, like fertilizers, have contributed to a dramatic ageing of
the cane fields in the country. According to Datagro, the average age of the cane
fields in the Centre-South today is now estimated at 3.8 years, significantly
higher than the optimal average age of 2.7 years. Third, the cane farming sector
in Brazil has undergone a significant change with the fast incorporation of
harvest mechanization, which presents challenges over the short-term as the
inexperienced work force adapts to a sudden shift in planting and harvesting
techniques.
Table 5 Industrial Cane crop indicators in Brazil
2002/03
2003/04
2004/05
2005/06
2006/07
2007/08
2008/09
2009/10
2010/11
2011/12(e)
Industrial Cane harvested area (mln ha)

C/S
3.5
3.8
4.2
4.3
4.7
5.2
6.0
6.4
6.9
7.1
N/N
0.9
1.0
1.0
0.9
1.0
1.1
1.1
1.1
1.1
1.1
Brazil
4.4
4.8
5.2
5.2
5.6
6.3
7.1
7.5
8.0
8.2
Industrial Cane harvested (mln tonnes)

C/S
270.4
299.4
328.7
336.9
372.7
431.2
505.0
542.0
556.9
495.0
N/N
52.0
59.0
58.0
49.3
53.6
60.2
67.7
60.9
62.7
67.4
322.4
358.4
386.7
386.1
426.3
491.4
572.7
602.9
619.5
562.4
Brazil
Industrial Cane yields (tonne/hectare)

C/S
77.1
78.7
78.7
78.4
79.5
82.2
83.5
84.2
80.5
70.2
N/N
56.8
59.8
58.8
53.5
56.0
56.6
63.7
57.1
56.7
61.0
Brazil
72.9
74.8
74.9
74.0
75.5
77.9
80.6
80.4
77.2
68.9
C/S - April/December; N/N - September/March

Erratic weather has been affecting Brazils cane production since 2009. 2009 saw
the wettest weather in Brazil in recent history, whilst 2010 and 2011 were
drought years, negatively impacting cane growth see fig. 1. While the severely
wet weather in 2009 did not affect cane volumes, bringing instead lower sugar
content in cane, the dry years of 2010 and 2011 lowered cane output
significantly from initial harvest expectations. In addition, in 2011 frost and
flowering hit the cane crop strongly, affecting cane growth development and the
early heavy rains of November brought an early finish to the harvest.
2
Industrial cane (used to produce sugar/ethanol at modern mills/distilleries) accounts for around
90-95% of total areas under cane in Brazil.
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2007
1400
1200
1000
800
600
400
200
0
2008
2009
2010
2011
Ap
r
M
ay
Ju
n
Ju
l
Au
g
Se
p
O
ct
No
v
De
c
Ja
n
mm
Fig. 1 - Cumulative rains April-January,

Ribeirao Preto
Source: CIIAGRO
Box 1: Drought resistant cane

Given the losses in cane output following adverse weather over the past couple of seasons, Brazil is
speeding up research for the development of drought-resistant GMO cane varieties. Embrapa, the
governments leading Agriculture Research Centre, has a budget of up to BRL 40 mln set aside for the
development of new cane varieties between now and 2015. Drought-resistant GMO cane has been a
focal research area since 2008 in collaboration with Japan International Research Center for Agricultural
Sciences - JIRCAS. The CTC (Centro de Tecnologia Canavieira) is another leading cane technology
centre in Brazil. Founded in 1969 by Copersucar, but since 2004 funded by almost 200 sugar cane
processing groups in the country, it is working on the development of GMO drought tolerant cane in
partnership with BASF Plant Sciences and Bayer CropScience in different and separate R&D projects.
Another active research centre is So Paulo- state funded IAC (Instituto Agronmico de Campinas). In
2005, IAC opened a research centre in the heart of Brazils sugar cane belt, Ribeiro Preto. The
programme has soon become one of Brazils largest with 400 experimental fields in 11 states. The
Ribeiro Preto station has two main focus of research: drought resistance and the development of cane
with high bioenergy content and high fibre content. Between 2005 and 2011, IAC developed 50 new
cane varieties.
Data from CANASAT, Brazils satellite system for monitoring cane area growth,
indicates that only 5.8% of the cane areas in the Centre South were used for
replanting in 2010/11, down from 6.4% seen in 2009/10 see table 6. In
2011/12, cane areas idle for replanting are estimated to have risen to 9%. In
previous years the replanting idle area as a share of total areas was also
relatively low, averaging only 7.3% between 2006/07 and 2008/09, but the
share of new expansion areas was high at 14.5%. Therefore, contrary to some
beliefs, the biggest impact on cane ageing has therefore come from the
slowdown in expansion into new areas, where cane yields are highest, and not
from a lower rate of cane replanting. Indeed, the share of new cane areas in
total harvested area has fallen to around 5% in 2011/12 and 2010/11,
significantly down from almost 10% seen in 2009/10 and the average of 14.5%
between 2006/07 and 2008/09.
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Table 6 - Share of areas used for crop replanting and new expansion areas in total cane areas by state, Centre-south Brazil
Idle for Cane Replanting
Expansion areas
2009/10
2006/07
to
2008/09
2011/12
2010/11
2009/10
2006/07
to
2008/09
2011/12
2010/11
Esprito Santo
4.7%
4.5%
Gois
5.1%
3.9%
5.2%
5.4%
12.2%
12.7%
24.3%
24.5%
6.7%
12.3%
5.2%
10.4%
6.1%
6.5%
5.1%
10.1%
9.2%
6.8%
8.5%
5.1%
14.5%
6.6%
21.8%
11.6%
Minas Gerais
Mato Grosso
Mato Grosso do Sul
3.8%
3.3%
2.5%
6.8%
13.8%
17.0%
29.3%
20.9%
Paran
6.2%
6.0%
5.3%
4.4%
2.7%
2.5%
5.6%
16.8%
Rio de Janeiro
4.4%
9.6%
na
na
na
na
na
na
So Paulo
10.9%
6.1%
7.0%
8.0%
3.2%
2.8%
6.6%
12.3%
Centre-South
Total
9.0%
5.8%
6.4%
7.3%
5.3%
5.0%
9.8%
14.5%
Source: CANASAT/INPE
Sugar Cane Production Costs

One driver of the lower rate of cane renewal as well as expansion into new cane
areas has been the escalating cane production costs, driven by rapidly rising
farm production costs. This phenomenon is not exclusive to Brazil and also has
been affecting several other commodities, and is linked to sudden rises in world
market prices. Since 2005, many agricultural commodities have seen world
market price rises of well over 10% a year on average: maize, at 20%; cotton, at
19%; sugar, at 17%; coffee, at 16%; soybeans, at 14% (for more details, see
Commodity Prices in ISO Quarterly Market Outlook (MECAS(12)02).
A February 2012 study by CNA/PECEGEs concludes that cane production costs in
Brazil were consistently higher than the cane price between the 2007/08 season
and the 2010/11 season.3 In 2011/12, although cane production costs continued
to rise sharply year-on-year, they fell below cane prices for the first time in 5
years. Total cane production costs in the traditional growing areas of CentreSouth Brazil are now estimated at BRL 71/tonne, up from BRL 59.3/tonne in
2010/11, but are estimated lower at BRL 56/tonne in new expansion areas. The
average cane production costs for the Centre-South are today therefore above
BRL 60/tonne (USD 35.29/tonne).
3
CNA is Brazils Confederation of Agriculture and Livestock and PECEGE is the Agribusiness
Economic Research Centre of the University of So Paulo. See Pecege/CNA, Custos de Produo
de Cana-de Acar, Acar e Etanol no Brasil: Acompanhamento da Safra 2011/12, February
2012, ISSN 2177-4358.
MECAS(12)05

Statistics Commitee
Much of the rise in cane production costs in Brazil can be linked to the higher
cost of inputs. The ISO in 2011 conducted a survey on worldwide input costs in
cane and beet farming including Brazil (for more information see MECAS(11)18
on Input Costs in Cane and Beet Farming). The results have showed that, in
Brazil, the cost of seed cane doubled from USD 20/tonne to USD 40/tonne
between 2005 and 2010. The cost of fertilizer rose from USD 309/tonne in 2005
to USD 568/tonne in 2010. Land rent costs rose from USD 212/ha in 2005 to
USD 435/ha in 2010. Crucially, the cost of mechanized harvesting skyrocketed
from USD 210/ha to USD 460/ha see table 7.
Table 7 - Indicative Input Costs in Cane Production in Brazil

2005
2006
2007
2008
2009
Land rent (USD/ha)
212
334
264
284
317
Fertilizers (USD/tonne)
309
334
484
815
488
Seed cane (USD/tonne)
20
30
24
27
29
Mechanical harvesting (USD/ha)
210
350
280
300
320
2010
435
568
40
460
Source: MECAS(11)18
The high cost of mechanized harvesting is indeed an important driver of cane

production costs in Brazil. Although over the longer term mechanization can
increase cane yields, over the short term the reverse can happen. In the CentreSouth, where land inclination can be as high as 15o, mechanization has led to a
loss in agricultural yields in the past couple of seasons. First, there are
operational challenges in properly training staff to handle the sudden switch to
mechanical harvesting. Second, the rising quantities of waste left by the
harvesting machines have been linked to potential disease dissemination and
hence lower agricultural yields. Third, in areas of more unfavourable topography
there is a decrease in the harvesting speed. For example, a study on
representative cane harvesting practices from Brazil and Australia puts the
average speed of mechanical harvesting in Brazil at 4.7 km/h, compared to 8
km/h in Australia. 4 The higher costs associated with mechanical harvesting in
Brazil are expected to linger over the next few years as producers change quickly
to adapt to strict new legislation on cane burning. By 2014, 75% of all cane
harvesting in the states of So Paulo and Minas Gerais will need to be
mechanized, rising to 100% three years later. It is estimated that around 60% of
the harvest in these two states has been mechanized during the 2011/12
campaign, compared to less than 30% only five years ago.
PECEGE/Canegrowers/Rex Consulting/Queensland University, Comparativo das Prticas

Agrcolas de Brasil e Austrlia, 2011. ISSN-2117-4358.
MECAS(12)05

Statistics Commitee
Another fast rising input cost is fertilizer. Table 8 shows that fertilizer costs for
new plant cane have risen by 55% in USD between 2007/08 and 2010/11, from
USD 434/tonne to an average of USD 674/tonne in 2010/11.
Table 8 - Cost of a tonne of cane fertilizer in Centre South Brazil (BRL and
USD)
2007/08 2008/09 2008/09 2010/11
Fertilizer New Plant Cane(BRL/tonne)
793
1,267
1,103
1,159
Fertilizer Ratoon Cane(BRL/tonne)
740
1,062
1,007
963
BRL/USD Exchange Rate
Fertilizer New Plant Cane(USD/tonne)
Fertlizer Ratoon Cane(USD/tonne)
1.83
2.03
1.84
1.72
434
405
625
524
599
547
674
560
Source: Pecege/CNA/MECAS(11)18
Of importance, there is no respite in sight from rising fertilizer prices. Between

the second half of 2011 and early March 2012, the global benchmark price of
urea (nitrogen fertilizer) US Gulf FOB - has averaged over USD 450/tonne,
compared to around USD 350-400/tonne during the first half of 2011. Market
analysts expect world urea prices to remain supported at high levels during 2012
and beyond. This reflects the fact that China, the worlds largest urea exporter,
has now imposed a 110% export tax on the product, and that world fertilizer
demand is projected to remain strong. Imports of fertilizers by Brazil, the worlds
largest cane producer, reached a record in calendar year 2011 at 19.84 mln
tonnes, or 70% of the countrys total fertilizer demand.5 With the envisaged
expansion of areas under cane and other crops, it is likely that this figure will rise
further in the near future.
Sugar Cane Prices

Cane production costs are not taken into account in the formula that calculates
cane prices paid to an independent grower. Cane prices are calculated based on
a methodology agreed by millers and growers, which only takes into account the
evolving market prices of sugar and ethanol. 6 Therefore the price of a kg of cane
sucrose ATR is a function of changes in the market price of sugar and ethanol in
both the domestic and the external markets multiplied by their respective market
shares.
Table 9 shows the dynamics of prices received by a grower in the state of So
Paulo. After trading many years between USD 19/tonne and USD 25/tonne, the
cane price escalated to USD 33/tonne in 2010/11 and further to an estimated
USD 39/tonne in 2011/12. In essence, although the gross cane price has
5
6
See http://www.anda.org.br/Principais-Indicadores-2011-Detalhados.pdf
See Consecana formula at http://udop.com.br/index.php?item=cana&op=tonelada
10
MECAS(12)05

Statistics Commitee
increased significantly over the past couple of years, this does not seem to have
prompted cane growers to significantly increase supply. Indeed, independent
growers have argued the price adjustment came too little too late as between
2005 and 2010 cane production costs increased sharply as well.
2000/2001
2001/2002
2002/2003
2003/2004
2004/2005
2005/2006
2006/2007
2007/2008
2008/2009
2009/2010
2010/2011
2011/2012 (p)
Table 9- Cane Prices - So Paulo (April/March crop)

ATR (kg/per
ATR Price
Cane price
BRL/USD rate
tonne of cane)
(BRL/tonne) (BRL/tonne) of exchange
142.15
196.10
27.88
1.93
29.96
2.45
144.47
207.44
147.62
243.80
35.99
3.27
148.88
203.00
30.22
2.91
35.13
2.84
143.70
244.50
145.94
308.30
44.99
2.28
150.86
343.00
51.74
2.15
35.81
1.83
146.57
244.30
143.25
278.20
39.85
2.01
132.75
346.52
46.36
1.84
141.16
403.80
57.00
1.70
138.00
500.00
69.00
1.75
Cane price
(USD/tonne)
14.46
12.21
11.02
10.38
12.37
19.73
24.06
19.60
19.84
25.17
33.14
39.00
Source: Consecana/ISO Ethanol Yearbook
Prices of Other Crops and Sugar Cane Competitiveness

How can the growing of sugarcane in Brazil be assessed in terms of its relative
competitiveness as against other major Brazilian crops? Production and
harvested area from the Brazilian National Institute of Geography and Statistics
(IBGE) is compiled for a selection of crops that compete (even if only partially)
for land in Brazils Centre-South: soybeans, coffee, maize and oranges.7 Of note,
the IBGE sugarcane area includes land under cane for industrial and nonindustrial purposes. In addition to crop production and area, actual domestic
prices expressed in USD for these crops are obtained using daily BRL price data
from Cepea, the agricultural economics research centre of the University of So
Paulo.8 A comparison of annual average crop production, total crop area, yield
and price indicators are presented in table 10.
Areas under cane have risen the fastest among the crops surveyed. Compared to
the average during the period 2000-2005, cane areas were 52% higher in the
2006-2011 period, followed by soybeans at 24% and maize at 10%, while areas
under coffee have decreased. It is important to note that cane crop land
substitution with coffee is particularly difficult when compared with soybeans and
maize, suggesting that sugar cane has expanded largely into non-agricultural
7
IBGE/CEPAGRO, Levantamento Sistemtico de Produo Agrcola, v.25 n.01 p.1-82 jan.201,

January 2012, ISSN 0103-443X
8
CEPEA: Centro de Estudos Avanados em Economia Aplicada, ESALQ, University of So Paulo,
Indicadores de preos, www.esalq.usp.br/cepea.
11
MECAS(12)05

Statistics Commitee
areas over the recent years.9 Gross income per hectare in sugarcane growing
has risen by 137% between the periods 2000-2005 and 2006-2011. This rise is
within roughly the same range as that for soybean and coffee gross earnings
up by a respective 146% and 135% between the two periods. Gross earnings in
maize farming rose by slightly less at 127% while in orange farming revenues
rose by only 61%. In conclusion, in terms of gross revenues, cane has remained
competitive against other crops grown in Centre-South Brazil over the past 6
years.
Table 10 - Production Indicators for a Selection of Major Agricultural Crops in Brazil
Average 2000- 2005
2006
2007
2008
2009
2010
2011
2012*
Sugarcane
5.28
6.36
7.08
8.14
8.51
9.08
8.91
8.75
Coffee
2.34
2.31
2.26
2.22
2.20
2.16
2.11
2.10
Soybeans
17.84
22.05
20.57
21.06
21.75
23.29
24.05
24.66
Maize
12.15
12.61
13.77
14.44
13.66
12.81
13.27
14.90
0.83
0.81
0.82
0.84
0.79
0.84
0.77
0.80
671.39
719.16
634.85
690.84
Harvested Area (mln ha)
Oranges
Production (mln tonnes)

Sugarcane
Coffee
Soybeans
378.16
477.41
549.71
645.30
2.78
2.57
2.25
2.80
2.44
2.87
2.67
2.96
44.25
52.46
57.86
59.24
57.35
68.52
74.83
70.07
Maize
39.24
42.66
52.11
58.93
50.75
56.06
56.10
62.52
Oranges
17.72
18.03
18.68
18.54
17.62
19.11
19.66
18.03
Sugarcane
71.52
75.12
77.63
79.27
78.85
79.20
71.23
78.94
Coffee
1.19
1.11
0.99
1.26
1.11
1.33
1.27
1.41
Soybeans
2.50
2.38
2.81
2.81
2.64
2.94
3.11
2.84
Maize
3.22
3.38
3.79
4.08
3.71
4.37
4.23
4.20
21.52
22.38
22.75
22.64
22.38
22.67
25.50
22.66
Yields (tonne/ha)
Oranges
Prices (USD/tonne)
Sugarcane
12.14
24.06
19.60
19.84
25.17
33.14
39.00
36.00
1,199.84
1,912.70
2,161.50
2,409.28
2,224.34
2,953.26
4,939.66
4,471.05
Soybeans
200.83
216.81
298.96
538.97
485.34
479.44
587.49
558.90
Maize
116.17
137.03
204.81
239.33
176.95
204.59
302.85
284.67
Oranges
175.52
243.92
271.41
245.25
125.94
310.00
371.26
na
Coffee
Gross income per hectare (USD)

Sugarcane
Coffee
Soybeans
Maize
Oranges
866.03
1,807.33
1,521.59
1,572.80
1,984.76
2,624.54
2,777.93
2,841.90
1,417.70
2,128.78
2,147.06
3,032.36
2,465.55
3,937.29
6,255.13
6,293.94
500.95
515.93
841.07
1,516.33
1,279.61
1,410.30
1,827.92
1,587.95
370.50
463.47
775.24
976.47
657.35
895.00
1,280.70
1,194.41
3,774.90
5,458.86
6,174.64
5,552.55
2,818.41
7,027.60
9,466.69
na
* 2012 data are estimates

Source: IBGE/ISO/Cepea
While the replacement of soybeans areas with sugarcane has occurred in the past, the
substitution of areas used for coffee growing with sugarcane is negligible.
12
MECAS(12)05

Statistics Commitee
Part 3: Industrial Processing

Leading Milling Groups
The 414 mills that operate in Brazil today are controlled by 150 different groups,
allegedly making the sugarcane processing sector in Brazil one of the least
concentrated in terms of corporate structure in Brazils agribusiness. While during
most of the past decade entrant groups would focus on acquisitions of greenfield
projects, since the 2008 credit crunch, mergers and acquisitions have continued
to shape the industry, with many new players now entering the sector by
purchasing existing brownfield facilities. The countrys largest sugar millers
association is UNICA, whose 146 members account for respectively 60% and
50% of Brazils sugar and ethanol production.
According to Datagro, 25 producing groups controlled 52.9% of the countrys
cane total crush in the 2010/11 (April/March) harvest see table 11. Cosan was
then the market leader, followed by Louis Dreyfus-Santelisa Vale (LDC SEV).
Guarani (Tereos/Petrobras) was the third largest producing group in 2010/11. Of
interest, in the wake of the ensuing mergers and acquisitions of the past year,
the sector has undergone further significant transformations. Raizen, a new joint
venture between Shell and Cosan, is today the countrys market leader and BP
has entered the league of the top producers by acquiring new assets worth USD
680 mln.
Razen Energia is Brazils largest sugar/ethanol producer and exporter. The
company has 24 sugar/ethanol mills with total cane crushing capacity of 65 mln
tonnes. Razen expects in the coming season to break Cosans 2010/11 cane
output record, with a forecast cane crush at 57.6 mln tonnes, sugar production
at 4.3 mln tonnes and ethanol production at 2.4 bln litres. The countrys second
largest sugar/ethanol producer is LDC SEV. In late 2009 Luis Dreyfus, which was
then ranked Brazils 5th largest producer, took over Santelisa Vale to become the
worlds second largest sugarcane milling group, LDC SEV. The group has 13 mills
in operation and is seeking to invest BRL 7 bln in further expansion between
2012 and 2016. The third largest producer is Guarani, of which Tereos
International has 68.6% of shares, with the balance with Petrobras. Guarani
owns 6 mills in So Paulo state Brazil with a 50% shareholding in a seventh mill,
Vertente.
13
MECAS(12)05

Statistics Commitee
Table 11 Top cane processors in Brazil

2010/11 crop (April/March)
Group
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
COSAN
LDC SEV
GUARANI
USAUCAR
ALTO ALEGRE
CARLOS LYRA
BUNGE
SO MARTINHO
ZILOR
NOBLE
RENUKA
T.WANDERLEY
GVO
COLORADO
PEDRA
ETH
USJ
COLOMBO
MORENO
CLEALCO
BAZAN
FARIAS
BERTIN
ARALCO
VALE DO VERDO
TOTAL CRUSH OF TOP 25
TOTAL BRAZIL
SHARE %
Source: Datagro
Cane Output (tonnes)

54,541,000
36,321,710
19,661,000
15,922,293
15,466,392
15,159,952
13,483,556
13,001,551
10,817,798
10,672,179
10,297,346
10,276,340
10,030,137
9,454,955
9,250,045
9,002,000
7,839,296
7,831,434
7,825,305
7,173,000
7,077,263
6,968,320
6,955,952
6,827,133
6,109,362
327,965,319
620,036,692
52.9%
Petrobras the Brazilian state oil giant and Guaranis minority shareholder- is a
relatively new player in the Brazilian sugar/ethanol industry since it announced in
2009 the acquisition of stakes in Guarani with Tereos but also in Total
Agroindstria in Minas Gerais state. The company also has a minority stake in
grupo So Martinho through the Nova Fronteira joint venture in Boa Vista mill,
which is also envisaging considerable expansion. With supply of ethanol
decreasing sharply in Brazil between 2010/11 and 2011/12, the government is
attempting to devise a strategy to allow the state company to produce as much
as 5 bln litres of ethanol by 2015, compared to around 1.3 bln litres it currently
produces (versus a total Brazilian output of 23 bln litres). This will most certainly
involve the acquisition of additional stakes in other producing groups in the
country for more details on Government Policy, see later section in the paper.
14
MECAS(12)05

Statistics Commitee
Another two Brazilian groups deserve special attention. Grupo So Martinho, with
a cane crush capacity of 14.5 mln tonnes, has three mills and shares in a fourth
one. The groups assets include Brazils largest mill, the So Martinho, with a
cane crushing capacity of over 8 mln tonnes a year. So Martinho Group is likely
to climb further in Brazils rankings over the coming years as its Boa Vista mill
seeks expansion to become another mega crushing facility with cane crushing
capacity of 8 mln tonnes. Brazils probably fastest growing group is ETH
Bioenergia. The company only entered the Brazilian sugar/ethanol industry in
2008. Today the group has 9 operating mills and 2 greenfield projects that are
likely come onstream over the next couple of years. Among the 3 new plants that
have opened in the Centre-South in 2011/12, 2 belong to the ETH group. ETH is
controlled by Odebrecht and its focus is ethanol production rather than sugar.
The target is to produce 3 bln litres of ethanol in 2012 and cogenerate up to
2,700 GW of electricity.
As table 11 indicates, Brazil has several other groups crushing over 10 mln
tonnes of cane, including both national and international companies. For an
outline of the other major national producers, see box 2. For an overview of the
other major international players, see next section on New Joint Ventures
Involving Foreign Groups.
Box 2: Brazil less known Sugar/Ethanol Giants
A few relatively unknown producing groups in Brazil have a cane crushing capacity of 10 mln tonnes
of cane or more. Three groups Usacucar, Alto Alegre and Carlos Lyra, deserve particular attention
as they all have cane crushing capacities exceeding 15 mln tonnes. Usacucar has 9 mills, 2 greenfield
projects and control a significant part of the output in the sugar belt in northwestern Paran, a top
cane producer after northwest So Paulo and southwest Minas Gerais. Group Carlos Lyra has 5 mills,
3 of which in the North-Northeast and 2 in Minas Gerais in the Centre-South, crushing 15.2 mln
tonnes of cane in 2010/11. Alto Alegre has 3 mills in the northwest of Parana and 2 mills in the
adjacent southwestern part of Sao Paulo state.
Group
Number
of Mills
Name of Mills
Terra Rica-Santo Antonio do CaiuaParanacity-Iguatemi-Ivate-Rondon-Cidade
Gaucha-Sao Tome-Tapejara
16.1 mln tonnes
Junqueira- Floresta-Santo InacioFlorestopolis-Central
15.5 mln tonnes
Caete-Marituba--Volta Grande- Delta Cachoeira
15.2 mln tonnes
Usacucar
Altoalegre
Carlos Lyra
Zilor
Tercio Wanderley
Zilor
GVO
Cane Crush
Barra Grande-Quata-Sao Jose

Campo Florido-Limeira do Oeste-IturamaCoruripe
11.2 mln tonnes
3
4
Barra Grande-Quata-Sao Jose

Catanduva-Itapira-Jose Bonifacio-Moncoes
10.8 mln tonnes

10.0 mln tonnes
15
10.8 mln tonnes
MECAS(12)05

Statistics Commitee
The New Joint Ventures Involving Foreign Groups

International groups are today among the top producers in the country, with a
25% share in production, up from zero twelve years ago and 12% in 2008/09
for a historical survey on FDI in Brazils sector, see MECAS (07)06 on CrossBorder Investments in the World Sugar Industry and MECAS (09)06 on Outlook
on Brazils Competitiveness in Sugar and Ethanol. Whilst the period between
2006 and 2009 saw the largest influx of foreign direct investment in greenfield
facilities, reacting to the fast growing domestic and international markets for
sugar and ethanol, more recently FDI has been linked to the acquisition of
production of scale and brownfield mills. In many regions, a single group now
controls a cluster of 3 to 4 factories in the same municipality, making it easier to
manage cane logistics.
Today 16 foreign companies have significant shareholding in Brazils mills: French
companies Tereos and Louis Dreyfus; Argentine/US Adecoagro, BP, Inversiones
Manuelita of Colombia, Shell, Pantaleon Sugar Holdings of Guatemala, Spanishbased Abengoa, Indias Shree Renuka, US based Bunge, Glencore, ADM and
Cargill; China Noble, Norways UMOE and Japanese Sojitz. These companies have
been aggressively buying stakes in the countrys sector over the past few years.
Bunge and Noble, which up to three years ago had only one mill each in Brazil,
have now a respective 9 and 4 mills. BP now controls 4 mills (1 being greenfield)
compared to only one greenfield project three years ago. Cargill, Adecoagro,
Louis Dreyfus and Sojitz are heavily investing in further expansion. Indias Shree
Renuka entered the sector in late 2009 with a quick 2-step acquisition of 4 mills
and is now seeking new partners.10 See Appendix for a comprehensive listing of
estimated assets, including estimated cane/sugar/ethanol production, pertaining
to international companies in Brazil.
There are however barriers to further growth in mergers and acquisitions in the
sector. One new restriction is coming from bankrupt mills, affected by the credit
crunch, which are awaiting judicial proceedings with its creditors. For example,
there is a current impasse regarding the sale of Albertina mill to LDC SEV group,
blocked by outstanding debt with Cosan. This mill was the first one to file for
bankruptcy in November 2008 in the wake of the Lehman Brothers collapse. As
indicated earlier, another 25 mills are unlikely to operate in 2012/13 due to
similar financial-related difficulties.
10
Press reports last year announced that Shree Renuka had signed a partnership agreement with
Singapore-listed trading house Olam to seek new acquisitions in the country.
16
MECAS(12)05

Statistics Commitee
Of importance, 2010 saw the reinterpretation by the Brazilian judiciary system of

a 1971 law regarding land ownership by foreign groups in Brazil. This has in
practice brought a new cap on the amount of land that can be controlled by
foreigners. A new law is set to be approved by Parliament, but in the meantime
uncertainties remain. This may have contributed to the recent slowdown in
mergers and acquisitions in the sector. While 26 mergers and acquisitions took
place in the Brazilian sugar industry in 2010, this has fallen to 15 last year.
According to UNICA, restrictions on foreign companies buying Brazilian farmland
will deprive the agricultural sector of much needed investment of up to BRL100
bln over the next few years. At present, foreign-controlled companies cannot
own more than 25% of land in any municipality.
But it is not only foreign groups that have been taking an active role in mergers
and acquisitions. Some national groups have bought back shares from foreign
companies, aided with capital raised from larger-scale operations and the higher
sugar/ethanol prices. One example is So Martinho, which bought back the 10%
shareholding that Mitsubishi Coporation had acquired in the Boa Vista mill. Group
Humus Agroterra also bought the Vertente mill from Moema group when this
was being taken over by Bunge. Nevertheless, in 2010, Humus sold 50% of its
shares in Vertente mill to Guarani.
Moreover, the bigger Brazilian producers have been also looking for investment
opportunities abroad. Cosan early last year bought the UK assets of Comma Oil
and Chemicals, a subsidiary of Essex Petroleum Company responsible for
distributing and exporting ExxonMobil lubricants. Copersucar, the
commercial/marketing arm of 48 Brazilian sugar/ethanol mills in So Paulo, Minas
Gerais, Paran and Gois, has recently set up a 50/50 joint venture in Dubai
called Copa Shipping to operate as an international trader of sugar. The company
is also negotiating a joint venture in Hong Kong, its first direct presence in Asia,
eyeing rising sugar import demand from China. Odebrecht is set to become one
of the first new foreign groups to invest in sugar/ethanol production in Cuba. The
company has signed an agreement with a Cienfuegos mill to revamp production
facilities over the next ten years. Odebrecht also intends to produce ethanol by
constructing a new distillery in Cuba. Odebrecht is also a shareholder, alongside
Sonangol and Damer, in a sugar mill opened last year in Angola, called Biocom.
Split to Sugar and Ethanol

As mentioned in the first section, Brazils cane output allocated to sugar
production has varied between 41% and 52% over the recent years. While the
bulk of ethanol output is for the domestic market, only a third of sugar output is
consumed in the domestic market, with the balance exported, largely as VHP
(high quality raw sugar). Table 12 shows the historical share of ATR (cane
sugars) allocated to the production of white and raw (VHP) sugar in So Paulo
17
MECAS(12)05

Statistics Commitee
state, as well as the shares going for hydrous and anhydrous ethanol and
ethanol for industrial purposes. The share of cane allocated to VHP sugar
exports has increased from 23% in 2004/05 to over 30% in 2011/12. Of interest,
the share of cane going to ethanol for exports has collapsed from over 10% on
average between 2006/07 and 2008/09 to less than 5% in the past two seasons.
Furthermore, since 2009 there has been a rapid decline in the share of cane
allocated to hydrous ethanol, which powers flexifuel cars (which can run on
hydrous ethanol, gasohol, which contains anhydrous ethanol, or any combination
of the two). This is despite a big rise in the total number of flexifuel cars
circulating in Brazil, from 10 mln in 2009 to over 15 mln currently.
The falling ethanol output marks a reversal in the previous trend, which showed
ethanol production gaining market share. With a lower cane crop last season,
producers decided to increase sugar allocation as this was more remunerative.
Table 12 - So Paulo State - ATR Product Mix (in %)
Domestic Sugar
2004/05
2005/06
2006/07
2007/08
2008/09
2009/10
2010/11
2011/12
15.73
16.32
15.49
14.04
11.68
12.10
11.07
11.15
White sugar exports
12.63
10.35
9.60
8.29
7.16
7.37
8.07
8.08
VHP sugar exports
23.11
23.70
27.22
24.33
22.88
26.86
29.02
30.09
35.74
34.05
36.82
32.62
30.04
34.23
37.09
38.17
Anhydrous fuel ethanol
24.81
22.99
12.97
15.1
14.36
12.82
15.28
17.26
Hydrous fuel ethanol
26.28
Sugar Exports
12.88
17.18
20.39
26.35
29.99
31.48
29.40
Anhydrous industrial ethanol
0.52
0.50
0.60
0.88
0.81
0.76
0.70
0.62
Hydrous industrial ethanol
1.56
1.45
1.47
1.77
1.67
1.72
2.03
2.36
39.77
42.12
35.43
44.1
46.83
46.78
47.41
46.52
3.16
2.28
9.00
4.72
6.79
2.39
1.86
1.94
Domestic Ethanol
Anhydrous ethanol exports
Hydrous ethanol exports
Ethanol exports
Total
5.6
5.23
3.46
4.52
4.66
4.51
2.58
1.95
8.76
7.51
12.46
9.24
11.45
6.90
4.44
3.89
100
100
100
100
100
100
100
100
Fig 2 shows that up to late 2008 the domestic price of hydrous ethanol (ex-mill)
in Brazil was on a par level with both the domestic and the international sugar
price. Since then, both the world as well as the domestic sugar price have often
been trading at a significant premium of at least 10 cents/lb or USD 220/tonne to
domestic ethanol prices. The industry has responded to the new price differential
by cutting ethanol output by 4 bln litres last season. This has worried the
18
MECAS(12)05

Statistics Commitee
government, which is now working on a long-term ethanol distribution strategy

see Government Policy section for details.
Fig. 2 - Ethanol vs sugar prices in Brazil, on a cents/lb
equivalent basis
World Sugar Price
40
Crystal sugar - domestic prices
35
Hydrous ethanol price
USD cents/lb
30
25
20
15
10
5
Ju
l
O -06
ct
Ja -06
n
Ap -07
rJu 07
l
O -07
ct
Ja -07
n
Ap -08
rJu 08
l
O -08
ct
Ja -08
n
Ap -09
rJu 09
l
O -09
ct
Ja -09
n
Ap -10
rJu 10
l
Oc -10
t- 1
Ja 0
n
Ap -11
rJu 11
l
O -11
ct
Ja -11
n12
Source: Cepea
The Dilemma Facing the Local Ethanol Market

Brazils total ethanol consumption has been falling over the past couple of years,
after reaching a peak of 23.92 bln litres in 2009, of which 22.5 were fuel ethanol
see table 13. Much of the ethanol demand destruction is blamed on petrol
(whose prices have been fixed by Petrobras for 6 years) regaining
competitiveness against hydrous ethanol, whose prices have since mid 2009
risen partly mirroring the higher sugar prices. When the hydrous ethanol price is
over 70% the price of gasohol, then hydrous ethanol stops being cost effective
due to its lower energy content. As a result, price-responsive flexifuel motorists
have been switching back to gasohol use. Brazils domestic hydrous ethanol
consumption is estimated to have fallen to 12.50 bln litres in 2011/12, down
from 14.50 bln litres in 2010/11 and 15.56 bln litres in 2009/10. Anhydrous
ethanol, which is blended with petrol at ratios that vary from 19% to 25% to
form gasohol, has seen a modest demand recovery, but this is however
insufficient to compensate the large drop in hydrous consumption.
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MECAS(12)05

Statistics Commitee
Table 13 - BRAZIL Ethanol Production, Import, Export, Consumption and Stocks

(bln litres)
Year
Production
Imports
Exports
Net trade
Fuel
Industrial
Total
Ending
Consumption
Consumption
Consumption
Stocks
2006
17.714
0.000
3.429
3.429
12.699
1.23
13.924
3.644
2007
22.243
0.000
3.533
3.533
16.204
1.30
17.503
4.851
2008
27.095
0.000
5.124
5.124
19.962
1.35
21.312
5.510
2009
25.323
0.004
3.296
3.292
22.523
1.40
23.923
3.617
2010
27.970
0.076
1.953
1.877
21.951
1.55
23.501
6.208
23.000
1.150
1.965
0.815
20.500
1.80
22.300
6.093
2011(p)
Table 14 shows that the hydrous ethanol/gasohol price ratio at the pump has
remained above 70% since December 2010. In other words, hydrous ethanol
prices have over the past couple of years reached a ceiling in the Brazilian
domestic market and demand has turned sluggish.
Table 14 - BRAZIL Hydrous Ethanol/ Gasohol
Retail Pump Price Ratio
2006
2007
2008
2009
2010
2011
2012
Jan
69%
63%
60%
60%
74%
70%
74%
Feb
70%
63%
59%
61%
76%
71%
72%
73%
Mar
76%
63%
59%
60%
71%
78%
Apr
77%
66%
59%
59%
66%
80%
May
69%
66%
59%
58%
63%
71%
Jun
63%
60%
59%
56%
61%
91%
Jul
63%
56%
59%
57%
61%
71%
Aug
64%
55%
59%
58%
62%
71%
Sep
62%
54%
59%
60%
63%
73%
Oct
60%
53%
60%
65%
66%
73%
Nov
59%
56%
60%
67%
68%
74%
Dec
59%
59%
60%
68%
70%
73%
The conclusion is that Brazil currently has a sugar/ethanol/petrol price dilemma.

While ethanol prices are today relatively high compared to petrol, they are
currently lagging sugar prices by a high margin. With sugar prices commanding a
price premium, producers do not have the necessary market signals to boost
ethanol output further. With lower ethanol supply, Brazils net ethanol exports
are estimated to have slumped to a multiple-year low of 0.815 bln litres in 2011.
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Government Policy and Taxation

Traditional government policy response to generally firm ethanol prices has been
to temporarily reduce the blend of anhydrous ethanol in petrol. This happened
last October when the blend was reduced to 20% - see table 15. However the
blend reduction means Brazil has now to increase imports of gasoline, which is
not a welcome outcome as world crude oil prices have been high. Raising the
domestic petrol price has been suggested as one alternative but the government
remains fearful of its impact on inflation.
Table 15 BRAZIL Mandated Ethanol Blend Ratio in Gasoline
2004
2005
2006
2007
2008
2009
2010
2011
Jan
25%
25%
25%
23%
Feb
25%
25%
25%
23%
25%
20%
23%
Mar
25%
25%
20%
23%
Apr
25%
May
25%
25%
20%
23%
25%
20%
23%-25%
Jun
25%
Jul
25%
25%
20%
25%
Aug
25%
25%
20%
25%
Sep
25%
25%
20%
25%
25%
20%
25%
Oct
25%
Nov
25%
25%
20%-23%
25%
Dec
25%
25%
23%
25%
Two figures indicate ratio varied within a range
25%
25%
25%
25%
25%
25%
25%
25%
25%
25%
25%
25%
25%
25%
25%
25%
25%
25%
25%
25%
25%
25%
25%
25%
25%
20%
20%
20%
25%
25%
25%
25%
25%
25%
25%
25%
25%
25%
25%
25%
25%
25%
25%
25%
25%
20%
20%
20%
Therefore the government has concluded that the only long-term solution to the
dilemma is to intervene more forcefully in the ethanol market by boosting
ethanol supplies. The policies may include the provision of loans of up to BRL
100 bln to the sector over the next decade. According to UNICA calculations, the
Brazilian sugar industry would need BRL 156 bln to double sugarcane production
from around 600 mln tonnes currently to 1.2 bln tonnes in 2020, based on an
additional 120 new mills.11 The key issue is that, while the government is seeking
to earmark these loans for cane used for ethanol production only and not sugar,
the industry argues that the future lies with the further development of flexible
sugar/ethanol production capacity. During years of surplus/deficit in the world
market, the industry would want to be free to switch production to or away from
sugar responding to price dynamics.
11
see part 5 of the paper for the ISO assessment on Brazils sugar/ethanol demand outlook
21
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Statistics Commitee
In practice, the government has been looking to foment most of the loans
through its bank development agency, the BNDES, which has a loan balance
sheet that is allegedly four times larger than the World Bank. In January, BNDES
released a financial stimulus package to boost the renovation of Brazils ageing
cane fields the Prorenova with loan resources of a total of BRL 4 bln for 2012
calendar year at an annual interest rate of around 8%. This measure came prior
to the release of a broader national working plan targeting an increase cane
areas from the current 9 mln hectares to over 14 mln hectares. This is likely to
be part of a programme called the Strategic Plan for the Sucro-energy Sector,
estimated to be completed in April 2012.
On another front, there is a project to finance the stocking of ethanol through
the National Monetary Council, the Conselho Monetrio Nacional (CMN). A longterm policy of financing stocks of ethanol is something that has been envisaged
for several years but has failed to take shape. The programme of ethanol stock
financing may involve up to BRL 4.5 bln at an annual rate of interest of 8.7%,
which is still somewhat lower than the current Central Bank base rate of 9.75%.
From April 2012, Brazil will require that ethanol distributors present advance
contracts of 70% of the total expected sales for the season.
Another front of possible further government policy action is on ethanol taxation.
The industry argues that over the past ten years the government has on balance
provided more tax relief for gasoline than for ethanol. According to UNICA, in
2002, the Cide tax (sales tax) on petrol represented 14% of the pump price
whilst this has reduced gradually to a low of only 2.7% today. Overall taxation on
petrol amounts to 35% today, down from 47% ten years ago, while overall
taxation on ethanol amounts to 31%, practically unchanged from 10 years ago.
The industry argues that this would be the right time to cut ethanol taxation,
particularly the value-added tax or ICMS, which still varies hugely from state to
state. One step forward has been reached with the reduction in the ICMS tax on
ethanol in the state of Minas Gerais from 22% to 19% as from January this year.
In So Paulo, the countrys largest producer, the ICMS tax on ethanol is 12%,
while in Paran it is 18%. These compares to ICMS taxes on gasoline at 27%,
25% and 26% for Minas Gerais, So Paulo and Paran, respectively. In Gois,
the other top 4 producing state, the ICMS taxation on gasoline and ethanol is
currently at a respectively 29% and 22%. Of interest, imported anhydrous
ethanol has been exempt of ICMS since 1st October 2011, as the country has
relied on a record volume of seasonal ethanol imports. Last year, Brazil imported
over 1.1 bln litres of ethanol, mainly from the United States, compared to only 75
mln litres in 2010.
Small direct production subsidies programmes for Brazils sugar/ethanol supply
exist only in the North-Northeast region, where small to medium growers receive
a grant of BRL 5 per tonne of cane up to a maximum of 10 thousand tonnes in
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MECAS(12)05

Statistics Commitee
order to compensate for the regions higher production costs, arising from a
more unfavourable topography. In 2011, the total subsidies to the sector in the
North-Northeast region amounted to BRL 58 mln. The region has also been
struggling with high debt as a consequence of fast rising production costs.
According to the press, millers in the state of Pernambuco owe around BRL 15
mln of payments to independent cane growers. Over the past 3 years, the
government of Pernambuco has been handing out over 5 thousand tonnes of
fertilizers to small-scale growers, using the sugar/ethanol mills as distribution
points.
Part 4: Drivers of Brazils Competitiveness in the

World Market
In the last ISO paper on Brazil, MECAS (09)06, five major drivers of Brazils
competitiveness in the world sugar/ethanol market were assessed: production
costs, infrastructure and logistics, currency movements, ocean freight rates and
the world ethanol market conditions. Has Brazil gained or lost competitiveness as
a result of changes in these drivers over the past couple of years? In 3 out of
these 5 drivers, Brazil has lost some ground compared to other leading
exporters. However, on international demand for its sugar exports, as well as on
a sixth driver, diversification into other co-products such as cogeneration and
biochemicals from sugarcane, Brazil has made positive strides, consolidating its
degree of market competitiveness.
Production Costs
Sugar production costs ex-mill have risen sharply over the past few years, in line
with the sharp rise in cane production costs as highlighted earlier in the paper. In
its assessment of Brazils 2011/12 sugar production costs, PECEGE/CNA
estimates sugar production costs in Brazils traditional sugarcane belt to have
risen by as much as 20% to a record 19.56 cents/lb (BRL 776/tonne or USD
431/tonne) for VHP sugar and 21.78 cents/lb (BRL 819/tonne or USD 480/tonne)
for white sugar. Ethanol production costs, on a sugar equivalent basis, are
estimated to have reached 19.79 cents/lb for anhydrous and 18.03 cents/lb for
hydrous. PECEGE/CNA estimates however that the differential between sugar
market prices and production costs was positive for the second year in a row,
while in the three seasons between 2007/08 and 2009/10 production costs
exceeded remuneration (recall that for sugar cane the average market price only
overtook the production cost in the 2011/12 season).12
12
Pecege/CNA, Custos de Produo de Cana-de Acar, Acar e Etanol no Brasil:

Acompanhamento da Safra 2011/12, February 2012, ISSN 2177-4358.
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Statistics Commitee
In principle, significantly higher production costs should translate into losses in

world competitiveness for Brazil when it comes to export markets. No studies
comparing nominal sugar production costs across countries are in the public
domain. Nevertheless, LMC, a consultancy specializing in cross-country
production cost comparison, has recently established that Brazils cost
competitiveness has narrowed substantially and that opportunities for investment
may now lie elsewhere.13 The consultancy puts Brazils fob sugar production
costs at 21 cents/lb in 2011/12, significantly up from only 14 cent/lb in 2009/10.
The consultancy estimates that Brazils cost advantage as against other major
exporters, such as Thailand, Australia, Colombia and South Africa, has slipped
from about USD 80/tonne in the middle of the past decade to USD 30/tonne over
the past 3 seasons. Barriers to entry constitute a major obstacle, with
requirement investments to erect a new mill exceeding USD 150 mln.
It is unclear whether production costs will continue to rise in Brazil at the pace
seen over the past few seasons. With an expected recovery in cane yields and
with further gains to be achieved once full harvest mechanization is in place in a
few years time, production costs could stabilize. Although labour costs are
expected to continue to rise in line with GDP growth, there is much potential for
gains in labour productivity. Production costs are also a function of currency
movements see later section on Exchange Rate Competitiveness for more
details.
Infrastructure and Trade Logistics

Brazil has advanced in infra-structure and logistics over the past couple of years.
In 2010, the country faced a serious bottleneck in sugar shipments, with the
press reporting queues of up to 100 vessels waiting to load sugar at Santos port.
This problem was somewhat less pronounced last year, partly due to an overall
lower volume of exports as a result of a smaller crush, although queuing
problems of up to 80 vessels were still reported. Recent infrastructure work, such
as a new Rumo Logistics ship loading roof to allow vessel loading to be
unaffected by rainfall, should ameliorate the queuing problem in future.
A major recent development has been the March 2012 opening of a new sugar
rail terminal in Ribeiro Preto. This will allow the transport of 1.5 mln tonnes
sugar a year from Brazils main producing region to the port of Santos, by rail
and in only 10 hours already from 2012/13, saving significant time on the
previous 2-3 day journey of lorry transport by highway.
13
Todd, Martin, Cost of Production Key to Success, Proceedings of ISO 20th Jubilee Seminar,
November 2011.
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Statistics Commitee
Furthermore, planned investments in the Port of Santos should increase

container loading capacity to 8 mln TEUs from todays 3.2 mln TEUs. Odebrecht
and Coimex are investing in brand new terminals at Santos. Codesp (Santos port
authority) is investing BRL 200 mln for an upgrade of the terminal used by
Copersucar and Cosan. Copersucar is soon upgrading its export terminal, with
current capacity from 5.5 mln tonnes, to 7.5 mln tonnes. On the ethanol front,
investment in pipeline infra-structure is consolidating three existing projects into
one and is being led by Logum (of which Raizen, Copersucar, Petrobras and
others are shareholders), with the construction of a network of ethanol pipelines
in Brazil for the transport of 23 bln litres, linking the state of Gois with the
South-East coast.
Furthermore, a hydroway (Tiet-Paran river) to aid ethanol transport in western
So Paulo state is being developed. In January 2012, ALL logistics has
inaugurated a railway to transport ethanol from the mill cluster in Mato Grosso
do Sul to the state capital, Campo Grande.
International Demand for Brazilian Sugar

While investments in transport infrastructure are being made, growing
international demand for sugar has continued to support the outlook for
production growth in Brazil. Brazil exported a record 28.6 mln tonnes of sugar,
raw value, in 2010, up from an average of only 17 mln tonnes in the middle of
the past decade.
Only a few years ago, a crucial variable determining Brazils exports was ocean
freight rates. As of mid 2008, shipping white sugar in bags to Indonesia from
Brazil commanded a premium of USD 100/tonne over white sugar from Thailand.
This freight premium has now fallen to only USD 60/tonne see fig. 3. When
expressed as a percentage of the world white sugar price, the drop in the freight
premium is even higher, from 25% of the world market price in August 2008, to
less than 10% in February 2012.
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Statistics Commitee
Fig. 3 - Bagged White Sugar Freight to Indonesia by Origin, 14k

t vessel, USD/tonne
BRAZIL
160
THAILAND
140
120
100
80
60
40
20
18
/0
8/
20
11
18
/0
8/
20
10
18
/0
8/
20
09
18
/0
8/
20
08
Similarly, the relative cost of shipping raw sugar in a 40 thousand tonne vessel
has declined over the past few years. As late as mid 2008, the freight for
Brazilian bulk raw sugar to Iran, for example, commanded a premium of USD
60/tonne over raw sugar from Thailand. This freight premium has now fallen to
only USD20/tonne see fig. 4. When expressed as a percentage of the world
raw sugar market price, the freight premium has dropped further from around
20% in mid 2008 to only 4% as of February 2012.
Fig. 4 - Bulk Raw Sugar Freight to Iran by Origin, 40k t

Vessel, in USD/tonne
BRAZIL
11
18
/0
8/
20
10
8/
20
18
/0
8/
20
09
THAILAND
18
/0
18
/0
8/
20
08
140
120
100
80
60
40
20
0
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MECAS(12)05

Statistics Commitee
The fact that it has become cheaper for Brazil to ship sugar to Asia relative to
other countries has diversified the pool of destinations for Brazils sugar exports.
According to ISO statistics, back in the middle of the past decade, only Russia
imported more than 1 mln tonnes from Brazil. In 2010, 8 countries have done so
see table 16. In particular, exports to countries such as Iran, China, the EU and
Indonesia have boomed over recent years. Preliminary data from the Ministry of
Agriculture for 2011 confirm this trend, showing 9 countries importing more than
1 mln tonnes from Brazil, with exports to China alone, Brazils new main export
destination, exceeding 2 mln tonnes.
Table 16- BRAZIL - Exports by Country of Destination

Country of Destination
2004
2005
2006
2007
2008
2009
2010
Raw Sugar
Russian Fed.
3,287,719
3,995,824
4,498,224
4,304,599
4,451,955
2,761,021
3,464,945
India
865,865
1,329,927
7,763
165,212
4,139,854
2,093,123
Iran
80,000
294,574
996,959
1,061,756
467,853
474,661
1,540,384
193,064
50,955
76,690
263,060
1,237,005
Algeria
627,227
579,030
698,865
820,200
738,511
935,356
1,186,024
EU
106,057
151,698
64,923
372,443
552,145
355,325
1,128,709
89,705
122,153
91,818
130,100
585,244
1,092,060
Egypt, Arab Rep.
826,504
535,788
969,941
709,566
1,180,541
676,713
1,074,218
Saudi Arabia
603,921
862,240
792,737
1,109,878
598,228
509,822
968,994
11,540
410,384
425,230
529,106
1,284,785
897,871
243,086
386,190
1,155,084
920,845
684,461
782,783
868,230
508
144,607
274,766
355,812
415,187
781,885
Morocco
528,007
516,100
570,688
526,542
550,360
833,894
774,063
Canada
646,984
756,903
778,777
868,493
830,076
890,816
699,884
Syrian Arab Rep.
103,498
70,945
91,859
118,700
579,528
374,278
611,444
Nigeria
548,815
852,880
908,723
843,984
1,022,853
1,003,565
579,857
667,260
884,796
975,626
313,980
1,151,578
468,606
China
Indonesia
Bangladesh
Malaysia
Venezuela
United Arab Emirates

Others
Total Raw Sugar
2,379,026
1,400,075
1,046,643
898,426
873,788
967,286
1,460,935
10,846,709
12,501,187
14,336,190
14,373,827
14,101,199
18,405,228
20,928,237
White Sugar
443,362
389,348
383,093
312,999
725,130
1,141,049
288,405
477,227
558,393
264,200
307,300
609,060
639,556
12,194
202,935
107,419
3,986
4,248
83,007
467,022
Ghana
458,981
479,588
295,345
415,564
466,477
289,602
454,565
Syrian Arab Rep.
413,511
364,445
269,789
285,234
176,004
262,320
431,032
Nigeria
739,519
468,456
257,409
341,983
383,368
275,459
430,024
Yemen Republic
Pakistan
Saudi Arabia
Others
Total White Sugar

Total Sugar Exports
706,544
543,272
328,044
3,535,409
3,462,039
3,316,695
4,461,977
3,685,076
3,794,852
3,784,133
5,448,019
5,898,052
5,194,398
6,156,037
6,042,016
6,582,702
7,675,425
16,294,728
18,399,239
19,530,588
20,529,864
20,143,215
24,987,930
28,603,662
Source: ISO Sugar Yearbook
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Table 17 shows a snapshot of the sugar vessel line-up by type of sugar and
category of buyers/sellers leaving Santos port in September 2011. Over 80% of
sugar exports were VHP. Sugar producers are the majority of direct sellers at the
port with traders constituting the majority of buyers.
Table 17 Sugar Vessel line-up from Brazil's Santos Port - September 2011
Quantity
traded
Share
Type of
('000
in
Seller
Buyer
Destination
Sugar
tonnes)
Trade
Sugar
Sugar
Producer
Refinery
VHP
148
7.91%
China, Canada, Black Sea,
Nigeria, Tunisia,
Bangladesh, India, Algeria,
Morocco, Indonesia,
United Arab Emirates,
Saudi Arabia, South Korea,
Spain, Egypt, Venezuela,
Malaysia,
VHP
1,227 65.61%
Sugar
Sugar
Producer
Trader
Ghana, Black Sea, Nigeria, Other
126
6.73%
Ivory Coast, Bangladesh
types
Bulgaria, US, Venezuela,
China
VHP
243 12.99%
Sugar
Sugar
South Africa, South Korea,
Trader
Trader
Ghana, Colombia,
Venezuela, China, Yemen,
Other
Tunisia, Nigeria
types
126
6.75%
Total
1,870
100%
Source: Datagro/ISO
Exchange Rate Competitiveness

Currency movements are today a major driver affecting Brazils competitiveness
in world markets. Over the past decade, the Brazilian currency has appreciated
significantly to the US Dollar, reversing a previous trend that ended in 2003. At
the time, much of Brazils fast rising competitiveness in world sugar exports was
attributed to the weak Real (BRL)- see MECAS (03)18 on Exchange Rates and
the World Sugar Market. Today, the exchange rate of BRL 1.7 to USD 1 is a far
cry from the lows of BRL 4 to USD 1 recorded in late 2002. Last July the BRL
reached a 12 and year high against the USD at BRL 1.56.
The analysis of the impact of currency movements on a countrys sugar export
competitiveness is naturally highly sensitive to the chosen time frame. Between
August 2006 to August 2011, the BRL has appreciated by 26% in relation to the
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MECAS(12)05

Statistics Commitee
USD. As a result, while world sugar prices expressed in USD doubled in the
period, when expressed in BRL they rose by only 50%.
Between 2007 and early 2012, currency movements have mitigated the higher
world sugar market prices for exporters from Thailand, Brazil and Australia,
whose exchange rates have appreciated by between 9% and 21% see Fig. 5.
By contrast, the INR and the ZAR have weakened, giving sugar exporters from
India and South Africa exchange rate competitiveness relative to other major
players. A continued relative strength of the currencies of Brazil, Thailand and
Australia, the worlds top 3 exporters in the recent years, is one of the factors
sustaining the relatively higher world market prices expressed in USD.
Fig. 5 - USD Exchange Rate Movements in

Sugar Exporting Countries
1.30
Index (1=2007)
1.20
1.10
1.00
0.90
0.80
2012(Jan/Feb)
2011
2010
2009
2008
2007
0.70
India
South Africa
European Union (EUR)
Guatemala
Sugar Weighted exchange rate
Thailand
Brazil
Australia
The World Fuel Ethanol Market

The world fuel ethanol market has lost its shine over the past few years. World
production contracted by 1% in 2011 to 84.4 bln litres, mainly due to Brazils
production slump. Production is expected to recover somewhat in 2012. Global
annual production growth averaged over 10% until 2010. World trade peaked in
2008, with Brazil providing then over 90% of fuel ethanol exports. Since then
Brazil has decreased its share in world ethanol exports while the United States
29
MECAS(12)05

Statistics Commitee
has increased its market share for more details see Ethanol Section in the QMO
- MECAS(12)02. Brazils net exports collapsed to less than 1 bln litres in 2011 and
are unlikely to rise significantly this year. Brazils ethanol export price, which rose
in the past years to partly mirror the sugar price rise, has caused import demand
to slump. This is a major reversal of fortune for Brazil, which until recently was
the worlds largest exporter of ethanol. In 2011 the US took over this role,
although export availability from the US is set to fall this year.
Longer term, global trade is expected to rebound. Global fuel ethanol
consumption could resume growth should declared government biofuel policies
worldwide be implemented in full. With this would come the chance for Brazil to
regain its position as the leading supplier, with ethanol exports potentially
matching the record of 5 bln litres seen in 2008 by the end of the decade.
Box 3: Can Brazil diversify its ethanol supply base?

Given the ethanol shortage of the past couple of years, new attempts have been made to produce ethanol
from sources other than cane. In Rio Grande do Sul state, two pilot plants in the towns of Sao Borja and
Camaqua are producing ethanol from rice. In Campos de Julio in the state of Mato Grosso, a flex-plant that
can make ethanol from either cane or corn has started up, enabling it to be operative in the cane off-season
using corn as feedstock. This year it has made its first production of 90,000 litres of corn ethanol, although
the production cost of BRL 1.23/litre is still higher than the cost of BRL 1.10/litre to make ethanol from
cane. The factory is seeking to expand production of corn ethanol to 120 thousand litres a day. Embrapa
has been testing the feasibility of large-scale ethanol production using sweet sorghum as feedstock in Mato
Grosso, with the first results due next May. While sweet sorghum is seen as low yielding compared to cane,
its natural advantages are the significantly short plant growing period 120 days and the fact that it could
be planted where cane growing is currently prohibited by government zoning. Last year the Cerradinho mill
in Catanduva (Noble) produced 1.5 mln litres of ethanol using sweet sorghum as feedstock. The trials are
part of a joint project led by Monsanto/CanaVialis, which since 2004 research sweet sorghum as a bioenergy
raw material. The conclusion is that, whilst new projects with alternative feedstocks are becoming
commercial, they will not challenge the dominance of sugar cane as Brazils main ethanol supply base.
Cogeneration
Much of the recent upgrade in Brazilian mills competitiveness has been centred
around maximising income streams from sugarcane byproducts. According to the
government energy research company EPE, Brazil is expected to double power
production from bagasse biomass over the next 10 years. Current cogeneration
capacity from sugarcane biomass of 4.5GW would more than double to 9.2GW
by the end of this decade under the plan.
Cogeneration will remain a future key to economic profitability. ETH, Brazils
fastest growing producer, has set up state-of-the-art cogeneration facilities in all
of its operating mills. Much of the produced bioelectricity has been sold to
schemes outside the government-arranged auctions.
30
MECAS(12)05

Statistics Commitee
In August, Brazil's main electric energy auction contracted only six plants
powered by sugarcane bagasse to sell 327MW of energy, as all of the remaining
contracts (861 MW) have been awarded to wind power. Wind power currently
faces fewer obstacles in terms of accessing the national grid. Prices of energy
sold during the August government-organized auction for new power capacity fell
to about BRL100 a megawatt-hour (USD 0.06/KWh), from BRL144 in August
2010. That's about a third less than companies need to build the power plants
that typically run cane mills.
Brazils next nationwide government-held electricity auction has been postponed
to 28th June from an initial scheduled date of 22nd March. According to UNICA,
the per unit price ceiling has been set at too low a level to generate meaningful
interest from the sugarcane industry in the country. The new price ceiling, at BRL
0.112/KWh (USD 0.063/KWh), is 20% lower than last years. The next electricity
auction has the objective to arrange long-term supply contracts for 20 to 30
years starting on 1st January of 2015. 22 projects amounting to 1,042 MW of
cogeneration capacity from sugarcane have registered for the coming auction,
but this represents only 4% of the total, as the bulk of the interest has again
come from the wind power sector, at 51% of the registered interest.
Biochemicals and Other Technologies

The ISO estimates that production of ethanol for bioplastics and biochemicals is
to rise to 4 bln litres in Brazil by the end of the decade. This is more than 3 times
the current level, reflecting booming interest in demand.
Braskem has been operating a 200,000 tonne bioethylene plant since August
2010 in Triunfo, Brazil, that uses sugarcane ethanol as its feedstock. The plant
was the first commercial-scale green ethylene plant in the world. The produced
ethylene is converted into equivalent polyethylene (PE) resin or green plastic.
In late 2011, Braskem entered an agreement with German bioplastics company
FKuR to process Braskem bioethylene into polyethylene compounds to be
marketed in Europe.
At its bioplastics Triunfo factory, Braskem consumes up to 570 million litres of
ethanol a year. The ethanol used as feedstock is initially being sourced from
major Brazilian producers in the Minas Gerais, Paran and So Paulo states. The
ethanol is transported from these states by water and rail, and a small portion by
road.
Meanwhile, Dow Chemical announced in November 2011 that Dow and Mitsui &
Co., Ltd., of Tokyo, Japan, have secured all necessary governmental regulatory
approvals and completed the formation of a previously announced 50:50 joint
31
MECAS(12)05

Statistics Commitee
venture in Brazil, making Mitsui a 50% equity interest partner in Dows operation
in Santa Vitria, Minas Gerais, Brazil. The initial scope of the joint venture
includes production of sugar cane-derived ethanol to be later used for production
of polyethylene for bioplastics.
Production of bioplastics other than ethylene is also a reality in a few other
sugar/ethanol mills in Brazil. Sugarcane can also be used as a direct feedstock
rather than ethanol. One example is the current production of PHA
(polyhydroxyalkanoates) from sugarcane by Balbo Group in Brazil.
On other biochemicals, BioAmber Incorp. is working with Tereos to study the
feasibility of two possible facilities that would produce crystalline bio-succinic acid
and/or bio-based 1,4 BDO (butanediol) in Brazil. The company expects to provide
bio-succinic acid and bio-based 1,4 BDO proprietary technologies, while Tereos
expects to provide long-term sugar cane biomass feedstock supply, utilities,
available infrastructure and shared services.
Part 5: Brazils Sugar/Ethanol Supply and Exports to

2020 and Outlook
Ethanol Demand/Supply to 2020
Estimating domestic demand for ethanol in Brazil remains crucial to forecasting
Brazils sugar/ethanol demand and supply to 2020. Since 2007, over 50% of
Brazils cane output has been allocated to ethanol production. What is the
outlook for domestic demand for fuel ethanol to 2020 and how is this likely to
affect the cane allocation to ethanol compared to sugar?
Most of Brazils light vehicle fleet will be powered with flexifuel engines by the
end of the decade. Today, approximately only half of the countrys total gasoline
demand comes from flexifuel cars, with the balance coming from cars whose
engines can only take gasohol. By 2020, the vast bulk of Brazils gasoline
demand will come from flexifuel cars since their share in the countrys total light
vehicle fleet will rise to close to 90%. There are today around 15 mln cars with
flexifuel engines running in the country, a figure that is likely to rise to as many
as 40 mln by 2020.
Between 2006 and 2009, around 75% of all flexifuel cars ran on hydrous
ethanol, a share that declined to 48% in 2010 and further to 35% last year. The
ISO projects that the number of flexifuel cars that will be running purely on
hydrous ethanol will rise from todays 6 mln to 8.5 mln cars by 2020. This still
means, nevertheless, that the share of total flexifuel cars using hydrous ethanol
32
MECAS(12)05

Statistics Commitee
as opposed to gasohol will continue to decline, reaching only 20% by 2020.

Unless petrol prices rise significantly from todays level, it is unlikely that there
will be a more rapid switch away from gasohol toward hydrous ethanol use by
flexifuel car motorists, as this would cause hydrous ethanol pump prices to
suddenly escalate, dampening additional demand growth potential.
As a result, total fuel ethanol demand in Brazil is forecast to reach 34.6 bln litres
in 2020 split between 16.8 bln of anhydrous and 17.8 bln litres of hydrous
ethanol see fig. 6. This compares to todays estimated fuel ethanol demand of
21.5 bln litres split between 8 bln litres of anhydrous ethanol and 13.5 bln litres
of hydrous ethanol. Total domestic ethanol demand is forecast at 38.6 bln litres,
after allowing for 4 bln litres of ethanol for industrial purposes (including ethanol
for production of biochemicals).
60
20
18
50
16
14
40
12
30
10
8
20
6
4
10
2
0
Hydrous Ethanol Demand, bln litres
Gasoline and Anhydrous Ethanol Demand, bln litres
Fig. 6 - Gasoline and Fuel Ethanol Demand Forecast, Brazil, 20102020
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Gasoline Demand
Anhydrous Ethanol Demand
Hydrous Ethanol Demand
Source: ISO
With an additional allowance of 5 bln litres for export markets, which remain
sensitive to world market developments, Brazils total ethanol production is
forecast to reach 43.6 bln litres in 2020, compared to 25 bln litres currently - see
table 18.
33
MECAS(12)05

Statistics Commitee
Table 18- Brazil's estimated total ethanol supply/demand to 2020, bln litres
Consumption
Production
Net exportable
surplus
Source: ISO
2009
23.9
25.3
2015(f)
28.9
30.6
2020(f)
38.6
43.6
1.4
1.7
5.0
Forecast growth 2009-2020

4.5%
5.1%
Annual Growth
2000-2009
6.8%
9.2%
Cane Sucrose Supply to 2020

As this paper has revealed, cane growing in Brazil is undergoing a period of
many challenges, which have negatively affected both cane yields and the rate of
cane crop expansion into new areas. There is of course some unleashed potential
for both cane yields and ATR yields to rise over the coming decade, not only
recovering the losses of the past couple of years but also potentially reaching
new record highs by the end of the decade. The ISO currently forecasts that
cane yields will improve to reach an average of around 85 tonnes/ha by 2020.
Total area under cane is also forecast to rise over the next 8 years, albeit at a
lower rate than the one seen during the past decade. The ISO forecasts that
harvested cane areas are to rise to 10.1 mln hectares by 2020, from 8.2 mln
hectares harvested currently. ATR yields in the Centre South are also estimated
to rise from the current level of 140kg/tonne of cane to 146.8 kg/tonne of cane
in 2020. Nationwide cane production is therefore projected to rise from 620 mln
tonnes in 2010 to 846 mln tonnes in 2020, or an average annual growth of 3%.
Of interest, total sucrose supply, or ATR, is set to rise by an even higher annual
growth rate of 3.6% to an estimated to 123.6 mln tonnes in 2020.
Sugar Demand/Supply and Exports to 2020
In order to meet estimated ethanol demand as set out in the previous section,
61% of the cane availability or 518 mln tonnes, would need to be diverted to
ethanol production as opposed to sugar. This is significantly higher than the
current allocation of around 51%. Once ethanol demand is met, there would be
328 mln tonnes of cane left for sugar production, the equivalent to a potential
sugar output of 47.5 mln tonnes, raw value.
Would this potential sugar supply from Brazil be absorbed by both the domestic
market and the world market? The ISO sugar consumption model (see MECAS
(10)17 on World Sugar Demand: Outlook to 2020) estimates world sugar
demand at 201 mln tonnes, raw value, in 2020. If global production is to rise to a
level to match global demand, Brazils forecast sugar output would be equivalent
34
MECAS(12)05

Statistics Commitee
to 24% of world production, a similar market share enjoyed by Brazil currently.

Finally, Brazils sugar net exportable sugar surplus is therefore forecast at 32.9
mln tonnes, raw value see table 19.
Table 19 - Brazil's estimated sugar supply/demand to 2020, mln tonnes, raw value
Consumption
Production
Net Exportable surplus
Source: ISO
2009
12.2
34.3
22.1
2015 (f)
13.4
40.3
26.9
2020 (f)
14.6
47.5
32.9
Forecast
growth 20092020
1.6%
3.0%
Annual Growth
2000-2009
2.80%
9.13%
Conclusions
This paper has revealed that there is a growing number of challenges to Brazils
sugar/ethanol production growth for the coming years. The countrys frenzied
sugar sector expansion, with cane output growth of 10% a year, has definitely
come to a halt. Agricultural yields have declined following a significantly lower
share of higher yielding new plant cane in the total crop and a sudden switch
towards harvest mechanization. Adverse weather from La Nia and El Nio
events have also had their toll, prompting cane output to slump by 10% last
season. Production costs have escalated due to skyrocketing input costs and a
much stronger currency. Sugar production costs in Brazil are today estimated at
around 20 cents/lb, up significantly from 14 cents/lb of only three to four
seasons ago. Cane production prices lagged cane production costs for several
seasons following an escalation of input costs, like land rental costs and
fertilizers, with the latter driven largely by higher crude oil prices. Lower ethanol
prices relative to sugar prevent cane prices from fully accompanying the world
sugar market price rise. A stronger BRL has also made it much more costly to
invest in new production units. Moreover, the industry is facing an
unprecedented sugar/ethanol/petrol price dilemma, which is disencouraging
millers to increase ethanol supply, still the backbone of the countrys industry.
Last but not least, the industry problems have been compounded by a temporary
collapse in world import demand for Brazils ethanol.
However, there are reasons to believe that the Brazilian sugar/ethanol sector will
continue to expand over the current decade. First, cane is still a profitable crop
when compared to others grown in Centre-South Brazil, such as soybeans and
maize. Second, Brazil has made important strides in advancing domestic
transport infrastructure logistics as well as diversifying its geographical export
base. Third, diversification into cogeneration and bioplastics from cane are
helping provide additional revenue streams. Fourth, mergers and acquisitions
involving large and financially healthier national and international groups,
35
MECAS(12)05

Statistics Commitee
including oil giants, are modernizing and changing the shape of the industry,
which will eventually reap from much more efficient production and economies of
scale. In many regions, for example, a single milling group controls a cluster of
no less than 3 to 4 adjacent sugar mills, making it easier to manage cane and
sugar logistics from field to the market.
The ISO forecasts cane areas and yields to improve by 2020. Nationwide cane
production is projected to rise from 630 mln tonnes in 2010 to 846 mln tonnes in
2020, or an average annual growth of 3%. Only part of this growth will be met
by new greenfield mills, as there is currently an estimated brownfield spare
capacity of up to 150 mln tonnes. The outlook is for a medium to long-term
recovery in ethanol supply and demand growth. Total fuel ethanol demand in
Brazil is forecast to reach 34.6 bln litres in 2020 split between 16.8 bln of
anhydrous and 17.8 bln litres of hydrous ethanol. With an additional allowance of
4 bln litres for bioplastics/biochemicals production and 5 bln litres for export
markets, Brazils total ethanol production is forecast to reach 43.6 bln litres in
2020, compared to 25 bln litres currently. Once ethanol demand is met, there
would be 328 mln tonnes of cane left for sugar production, the equivalent to a
potential sugar output of 47.5 mln tonnes, raw value, around 8 mln tonnes
higher than the current output. The projected net sugar exportable surplus is
seen rising to 32.9 mln tonnes by 2020. Although no further market share gains
are expected for Brazil, the country will remain a world market price setter, and
developments in Brazil will continue to resonate strongly in the world
sugar/ethanol economy.
36
MECAS(12)05
Market Evaluation Consumption and Statistics Committee
Appendix: Production Indicators of Foreign Groups by Mill
Share holding
Start of
Operations
Cane
Crushing
Capacity,
mln tonnes
50% USJ
OP
15
16
State
Name of Mill
Company
SP
So Joo da Boa
Vista
Abengoa (Spain) 14
SP
Sao Luiz
Abengoa (Spain)
SP
Santo Antonio de
Posse
Abengoa (Spain)
MS
Anglica
Adecoagro (USA/Arg)17
MG
Monte Alegre
Adecoagro (USA/Arg)
18
MS
Ivinhema
Adecoagro (USA/Arg)
19
Cane
Crush,
mln
tonnes
Ethanol
Output, mln
litres
Cogeneration
Sugar,
tonnes
3.5
145
201,500 MWh
360,000
OP
90
230,000 MWh
285,000
OP
0.3
OP
OP
1.5
G (Operating
in 2013)
6 (2017)
30,000
134
166,001
30
16 MW
14 Abengoa website: http://www.abengoabioenergy.com/corp/web/pt/acerca_de/oficinas_e_instalaciones/bioetanol/brasil/vista/index.html,

http://www.valor.com.br/empresas/1011408/cargill-e-usj-querem-triplicar-moagem-de-suas-usinas-em-goias
15 Abengoa website: http://www.abengoa-bioenergy.com/corp/export/sites/abg_bioenergy/resources/pdf/acerca_de/es/Informe_Anual_2010_1.pdf
http://www.abengoabioenergy.com/corp/web/pt/acerca_de/oficinas_e_instalaciones/bioetanol/brasil/vista/index.html
16 Abengoa website: http://www.abengoabioenergy.com/corp/web/pt/acerca_de/oficinas_e_instalaciones/bioetanol/brasil/vista/index.html
17 Reuters website: http://www.reuters.com/finance/stocks/companyProfile?symbol=AGRO.K
18 Source: http://www.brasilagro.com.br/index.php?noticias/detalhes/4/18686, Adecoagro website : http://www.adecoagro.com/index.php?seccion_generica_id=194,
http://www.sermatec.com.br/por/noticias_show.php?cod=70
19 Source: http://www2.prnewswire.com.br/releases/pt/Adecoagro%20inicia%20constru%C3%A7%C3%A3o%20da%20Usina%20Ivinhema/12671
37
MECAS(12)05
81,000
Share holding
Start of
Operations
Cane
Crushing
Capacity,
mln tonnes
Cane
Crush,
mln
tonnes
Ethanol
Output, mln
litres
1.2
(10/11)
108 (2009)
State
Name of Mill
Company
MG
Limeira do Oeste
ADM (USA) 20
100%
OP
GO
Tropical
Bioenergia
BP (UK) 21
100%
OP
2.5
100
250,000 MWh
MG
CNAA Ituiutaba
BP (UK)
22
100%
OP
2.5
100
340,000 MWh
10
GO
CNAA - Itumbiara
BP (UK)
23
100%
OP
2.5
100
340,000 MWh
11
MG
CNAA Campina
Verde
BP (UK)
24
100%
12
MG
Santa Juliana
Bunge (USA) 25
80% Bunge, 20%

Itochu
OP
2.7
97
13
MG
Usina Itapagipe
Bunge (USA)26
100% Bunge
OP
1.7
1.1
50
14
TO
Pedro Afonso
Bunge (USA) - Itochu

(Japan) 27
80% Bunge
20% Itochu
OP
2.5
1.4
109
Cogeneration
38
175,000
340,000 MWh
102,900 MWh
202,000
63,000
180,000 MWh
20 Source: http://agricultura.ruralbr.com.br/noticia/2009/01/usina-limeira-do-oeste-encerra-safra-com-moagem-recorde-de-cana-2383578.html
21 Tropical Bioenergia website: http://www.tropicalbioenergia.com.br/chamada_noticia.php?id_noticia=312
22 Source: http://campinaverde.net/home/blog/2011/10/24/british-petroleum-confirma-investimentos-em-usina-de-alcool-em-campina-verde/
, http://www.desenvolvimento.mg.gov.br/pt/component/content/285?task=view
23 Source: http://destaque-mg.blogspot.com/2011/03/bp-faz-acordo-para-comprar-cnaa-de.html, http://campinaverde.net/home/blog/2011/10/24/british-petroleum-confirmainvestimentos-em-usina-de-alcool-em-campina-verde/
24 Campina Verde website : http://campinaverde.net/home/blog/2011/10/24/british-petroleum-confirma-investimentos-em-usina-de-alcool-em-campina-verde/
25 Bunge website : http://www.bunge.com.br/empresa/noticias.asp?id=241, http://www.bunge.com.br/empresa/noticias.asp?id=641
26 Source: http://www.fazenda.gov.br/resenhaeletronica/MostraMateria.asp?cod=486160, Cargill Website : http://www.cargill.com.br/pt/produtos-servicos/agricola/acucaretanol/index.jsp, Usina Ouroeste website: http://www.usinaouroeste.com.br/usitapagipe.html
27 Bunge website: http://www.bunge.com.br/empresa/noticias.asp?id=641
Sugar,
tonnes
MECAS(12)05
Share holding
Start of
Operations
Cane
Crushing
Capacity,
mln tonnes
Cane
Crush,
mln
tonnes
Ethanol
Output, mln
litres
Cogeneration
Sugar,
tonnes
100% Bunge
OP
1.4
0.9
73
41,700MWh
100% Bunge
OP
2.2
1.2
40
22,000MWh
106,000
State
Name of Mill
Company
15
MS
Monteverde
Bunge (USA)
16
SP
Usina Ouroeste
Bunge (USA)
17
SP
Usina Guariroba
Bunge (USA)
29
100% Bunge
OP
2.2
1.3
54
18
MG
Usina Frutal
Bunge (USA)
30
100% Bunge
OP
2.5
1.7
77
27,800MWh
102,000
19
SP
Cardoso
Bunge (USA)
31
20
MG
Usina Moema
Bunge (USA)
100% Bunge
OP
4.8
3.6
156
39,870MWh
234,000
21
GO
Sao Francisco
(Cargill & SJC

Bioenergia) USJ 33
50% Cargill 50%

SJC
OP
4.5
170
350,000 MWh
22
SP
Cevasa
Cargill
63%
OP
75
65,000 MWh
200,000
23
GO
Cachoeira
Dourada
(Cargill & SJC Bioe) USJ
50% Cargill 50%

SJC
G (Operating
in 2013)
2.5
170
200,000 MWh
420,000
28
29
30
31
32
33
34
28
32
34
94,000
Source: http://exame.abril.com.br/negocios/empresas/noticias/bunge-adquire-5-usinas-grupo-moema-us-1-5-bi-522279
Usina Ouroeste website: http://www.usinaouroeste.com.br/usguariroba.html
Usina Ouroeste website: http://www.usinaouroeste.com.br/usguariroba.html
Source: http://www.brasilagro.com.br/index.php?noticias/visualizar_impressao/12/27007
Source: http://www.scalcool.com.br/portugues/lista_usina.asp?codigo=125&uf=mg, Moema website : http://www.usmoema.com.br/usitapagipe.html
SJC Bioenergia website: http://www.sjcbioenergia.com.br/,
Cevasa website: http://www.cevasa.com.br/produtos.php, Source: http://www.paginarural.com.br/noticia/98763/cargill-investira-r-190-milhoes-para-produzir-acucar-na-cevasa
39
MECAS(12)05
24
State
Name of Mill
Company
SP
Rio Vermelho
Glencore 35
25
SP
Cruz Alta
Guarani
26
SP
Cia Energtica
So Jos
Guarani
36
27
SP
Mandu
Guarani
37
28
SP
Andrade
Guarani
38
29
SP
Vertente
Guarani/ CLEEL
30
SP
Guarani Tanabi
Guarani
39
Share holding
Start of
Operations
Cane
Crushing
Capacity,
mln tonnes
Cane
Crush,
mln
tonnes
100%
OP
1.3
Tereos
International
68.6%
/Petrobras
31.4%
OP
4.5
79
459,000
Tereos International
68.6% /Petrobras
31.4%
OP
4.2
248
226,000
68.6 %Tereos
International
31.4%Petrobras
OP
3.5
175
12 MW
200,000
68.6 %Tereos
International
31.4%Petrobras
OP
3.3
274
135,000 MWh
236,000
68.6 %Tereos
International
31.4%Petrobras
OP
1.6
74
68.6% /Petrobras
31.4%
OP
1.2
102
Ethanol
Output, mln
litres
Cogeneration
114,000
35 Source : http://www.e-usinas.com.br/Conteudo/Noticias/VisNoticias.aspx?ch_top=2272&Painel=1, Agranet: http://www.agranet.com/portal2/home.jsp?template=pubarticle&artid=1331288467234&pubid=ag044

36 Unica : http://unica.com.br/downloads/estatisticas/ranking0809.xls
37 Source: http://www.leonardoconcon.com.br/economia/controlada-da-acucar-guarani-adquire-usina-mandu-por-r-345-milhoes/
38 Unica: http://unica.com.br/downloads/estatisticas/ranking0809.xls
39 Usina Vertente website: http://www.usinavertente.com.br/
40
Sugar,
tonnes
MECAS(12)05
Cane
Crushing
Capacity,
mln tonnes
Cane
Crush,
mln
tonnes
Ethanol
Output, mln
litres
Cogeneration
90
414,383 MWh
5.6
245
12 MW
372,000
4.5
160
90 MW
340,000
OP
2.9
2.6
146
OP
2.4
1.8
96
26.45 MW
130,000
70,000 MWh
(export)
175,000
Share holding
Start of
Operations
68.6% /Petrobras
31.4%
OP
50% Unialco
25%Manuelita
25%Pantaleon
OP
State
Name of Mill
Company
31
SP
Severinia
Guarani
32
SP
Vale do Parana
(Suzanopolis)
Invs Manuelita,
Pantalen Sugar 40
33
SP
Santelisa 41
LDC SEV
34
MS
Rio Brilhante
LDC SEV
42
OP
35
SP
MB
LDC SEV
43
36
SP
Cresciumal
LDC SEV
44
1.7
OP
37
MG
Lagoa da Prata
LDC SEV
45
OP
2.4
90
38
SP
So Carlos
LDC SEV
46
OP
94
OP
1.8
OP
1.5
39
RN
Estivas
LDC SEV
47
40
MS
Maracaju
LDC SEV
48
Sugar,
tonnes
115,000
117,000
40Source: http://www.ifc.org/ifcext/agribusiness.nsf/Content/SelectedPR?OpenDocument&UNID=81B46EB0676F19998525729E0055A8B0
41 Unica: http://unica.com.br/downloads/estatisticas/ranking0809.xls, Source: http://www.leonardoconcon.com.br/economia/controlada-da-acucar-guarani-adquire-usina-mandu-porr-345-milhoes/
42 Odebrecht website: http://www.odebrechtonline.com.br/materias/01401-01500/1488/,
44 Source: http://www.revolucaomkt.com.br/noticias/ldc-amplia-usina-em-sp/, Unica : http://unica.com.br/downloads/estatisticas/ranking0809.xls
45 Wkimapia: http://wikimapia.org/18060719/pt/LDC-SEV-Bioenergia-Usina-Lagoa-da-Prata
47 Source: http://www.portogente.com.br/texto.php?cod=7191
48 Maracaju Government website: http://www.maracaju.ms.gov.br/secretaria-de-desenvolvimento/76-louis-dreyfus-promoveu-audiencia-publica-em-maracaju.html
41
MECAS(12)05
Share holding
Start of
Operations
Cane
Crushing
Capacity,
mln tonnes
1
Cane
Crush,
mln
tonnes
Ethanol
Output, mln
litres
Sugar,
tonnes
State
Name of Mill
Company
41
PB
Giasa
LDC SEV
49
OP
42
SP
Continental
LDC SEV
50
OP
2.3
109
43
SP
Vale do Rosario
LDC SEV
51
OP
5.9
245
44
SP
Jardest
LDC SEV
OP
1.2
48
86,000
45
MS
Passa Tempo
LDC SEV 52
OP
3.6
2.6
125
160,600
46
SP
Potirendaba
Noble (China Hong

Kong) 53
100%
OP
3.8
196
300,000 MWh
198,000
47
SP
Catanduva
Noble BP
100%
OP
4.6
219
300,000 MWh
216,000
48
SP
Meridiano
Noble (China Hong Kong)
55
100%
OP
49
SP
Noroeste Paulista
Noble (China Hong Kong)
56
100%
OP
54
Cogeneration
151,000
45 MW
400,000
1.8
115
49,000
49 Source : http://www.sindicape.com.br/inicio/index.php?option=com_content&task=view&id=391&Itemid=1
51 LDC-SEV website: http://www.ldcsev.com/unidades.php?id=3, Source: : http://cdm.unfccc.int/filestorage/F/S/_/FS_510456720/PDD%20NM-0001.pdf?t=WDZ8bTE2bmdnfDABeHZC5vJlNRwaBU93kvN, Unica: http://unica.com.br/downloads/estatisticas/ranking0809.xls
52 Canal de Cana: http://www.canaldacana.com.br/novo/view/mercado_trabalho/?act=listar&pag=3&noticia_id=1954
53 Source: http://economia.estadao.com.br/noticias/neg%C3%B3cios,noble-paga-us-950-mi-por-2-usinas-do-grupo-cerradinho,48268,0.htm
56 Source: http://www.investe.sp.gov.br/noticias/lenoticia.php?id=1051&c=6&lang=1, Unica : http://unica.com.br/downloads/estatisticas/ranking0809.xls
42
375,000
MECAS(12)05
Share holding
Start of
Operations
Cane
Crushing
Capacity,
mln tonnes
Cane
Crush,
mln
tonnes
Ethanol
Output, mln
litres
Cogeneration
Sugar,
tonnes
50%Cosan
50%Shell
OP
62
53
(10/11)
2,200
900 MW
4.3 mln
100%
OP
6.5
347
138 MW
290,000
170
157 MW
100,000
State
Name of Mill
Company
50
SP
Razen (24 mills:

Caarapo; Barra;
Benalcool; Bom
Retiro; Bonfim;
Costa Pinto;
Destivale;
Diamante; Dois
Corregos; Gasa;
Ibate; Ipaussu;
Junqueria;
Mundial; Rafard;
Santa Helena;
Sao Francisco;
Tamoio;
Univalem;
Araraquara;
Maracai; Matriz;
Paraguacu;
Taruma)
Razen (Shell/Cosan)57
51
SP
Equipav
Shree Renuka 58
52
SP
Revati
Shree Renuka
59
100%
OP
53
PR
Vale do Ivai II
(Sao Pedro do
Ivai)
Shree Renuka
60
100%
OP
2.2
54
PR
Vale do Ivai I
(Cambui)
Shree Renuka
61
100%
OP
0.8
57
58
59
60
61
Shell website: http://www.shell.com/home/content/investor/financial_information/quarterlyresults/2011/q2/

Unica: http://unica.com.br/downloads/estatisticas/ranking0809.xls
Shree Renuka website: http://www.renukadobrasil.com.br/br/historia
Udop: http://www.udop.com.br/index.php?item=noticias&cod=1077173
Udop: http://www.udop.com.br/index.php?item=noticias&cod=1077173
43
MECAS(12)05
Share holding
Start of
Operations
Cane
Crushing
Capacity,
mln tonnes
Cane
Crush,
mln
tonnes
Ethanol
Output, mln
litres
Cogeneration
Sugar,
tonnes
67%ETH
33%Sojitz
OP
2.5
(10/11)
360
130 MW
132,000
67%ETH
33%Sojitz
OP
3.8
67%ETH
33%Sojitz
OP
3.8
360
35 MW
67%ETH
33%Sojitz
OP
3.8
360
380,000 MWh
State
Name of Mill
Company
55
MS
Eldorado
62
56
MS
Costa Rica
Sojitz Co (Japan) ETH
57
GO
Morro Vermelho
Sojitz Co (Japan) ETH 64
58
GO
Agua Emendada
Sojitz Co (Japan)-ETH
59
GO
Rio Claro
67%ETH
33%Sojitz
OP
190
130 MW
60
MS
Santa Luzia
67%ETH
33%Sojitz
OP
180
380,000 MWh
61
SP
Conquista do
Pontal
Sojitz Co(Japan) ETH
67%ETH
33%Sojitz
OP
2.7
140
63
65
68
300,000 MWh
62 ETH: http://www.eth.com/index.cfm/10/pt/quem_somos, Source: http://economia.terra.com.br/noticias/noticia.aspx?idNoticia=200803141919_RTR_1205522393nN14422113

63 Udop: http://www.udop.com.br/index.php?cod=1067964&item=noticias
64 Source: http://www.nuca.ie.ufrj.br/blogs/gesel-ufrj/index.php?/archives/13476-ETH-Bioenergia-inaugura-UTE-Morro-Vermelho.html
66 ETH: http://www.eth.com/index.cfm/2/pt/noticias/artigo_id=374/Unidade_Rio_Claro_entra_em_operacao
67 Udop: http://www.udop.com.br/index.php?item=noticias&cod=1060260
68 Udop: http://www.udop.com.br/index.php?cod=1074081&item=noticias, http://www.udop.com.br/index.php?cod=1067964&item=noticias,
http://www.udop.com.br/index.php?cod=1061515&item=noticias
44
MECAS(12)05
Share holding
Start of
Operations
Cane
Crushing
Capacity,
mln tonnes
67%ETH
33%Sojitz
OP
2.1
67%ETH
33%Sojitz
OP
1.6
State
Name of Mill
Company
62
MT
Alto Taquari
Sojitz Co (Japan)-ETH
63
SP
Alcdia
64
SP
Euclides da Cunha
Sojitz Co (Japan) 71
67%ETH
33%Sojitz
G (Projected
without date)
2.7
65
SP
Presidente
Epitcio
Sojitz Co (Japan) 72
67%ETH
33%Sojitz
G (Projected
without date)
2.7
66
SP
Dest.
Paranapanema
UMOE (Norway) 73
OP
2.7
69
70
Cane
Crush,
mln
tonnes
Ethanol
Output, mln
litres
Cogeneration
190
70 Sojitz: http://www.sojitz.com/en/news/2010/20100219.html
71 Odebrecht: http://www.odebrechtonline.com.br/materias/01401-01500/1488/
72 Source: http://economia.terra.com.br/noticias/noticia.aspx?idNoticia=200803141919_RTR_1205522393nN14422113 ; http://www.odebrechtonline.com.br/materias/0140101500/1488/
45
MECAS(12)05
Sugar,
tonnes

PUBLICATIONS PRICES FOR 2012
Seminars Proceedings:
2011: Competitive Edge in Sugar - the Road to 2020

Online
350
2010: Crunch time goodbye - Sugar and Bioenergy flying high

Per CD/Online
110
2009: Crunch time for Sugar and Ethanol

Per CD/Online
110
Workshops Proceedings:
2011: Sugar Industry Potential in Africa

Online
275
2010: The African Sugar Economy: Stock Taking & Potential
Development Per CD/Online 70
2009: Selected issues Impacting on the Sugar/
Ethanol Economy Per CD/Online
70
Specials:
2009: ISO/Egypt International Conference Proceeding

World Perspectives for Sugar Crop as Food
and Energy
Per CD/Online
170
2008: Research on Sugarcane Derivatives by Cuban Institute
for Research of Sugarcane Derivatives (ICIDCA) -
Spanish
Per CD-ROM
175
ISO Studies:
International Survey on Yields and Prices for Sugar Crops
(MECAS(11)19)*

250
Input Costs in Sugarcane and Sugarbeet Farming
(MECAS(11)18)*

250
Thailands Sugar and Fuel Ethanol Outlook (MECAS(11)17)*

250
South American (excluding Brazil) Sugar and Ethanol Prospects
(MECAS(11)07)*

250
Government Sugar Trade Related Policy in a New Market
Environment: a Survey (MECAS(11)06)*
250
Niche Sugar Markets (MECAS(11)05)*
250
Fuel Ethanol Prices & Drivers - a World Survey (MECAS(10)19)*

205
Industrial and Direct Consumption of Sugar - an International
Survey (MECAS(10)18)* 205
World Sugar Demand: Outlook to 2020 (MECAS(10)17)* 205
ISO Studies (cont):

Central American/Caribbean Sugar & Ethanol Prospects
(MECAS(10)07)*

205
World Trade in Raw & White Sugar - Recent Trends & Prospects
(MECAS(10)06)*

205
GM Beet & Cane : Prospects in a New Market Enviroment
(MECAS(10)05)*

205
The International Physical Trade of Sugar - a Survey
(MECAS(09)19)*

205
Domestic Sugar Prices (MECAS(09)18*
205
Market Potential of Sugarcane & Beet Bio-products
MECAS(09)17*

205
Sugarcane Ethanol and Food Security (MECAS(09)07)* 185
Outlook on Brazils Competitiveness in Sugar & Ethanol
(MECAS(09)06)*

185
Cogeneration Opportunities in the World Sugar Industry
(MECAS(09)05)*

185
EU Sugar Policy Reform Ramifications for Preferential
Exporters (MECAS(08)18)*
185
The International Trade of Fuel Ethanol Outlook to 2015
(MECAS(08)17)*

185
US Sugar under the 2008 Farm Bill National and
International Implications (MECAS(08)16)*
185
Indias Future Role in the World Sugar Trade
(MECAS(08)07)*
175
Regular Publications:
Quarterly Market Outlook*
325
Mid-term analysis on Sugar, Ethanol & Sweeteners market development
Monthly Statistical Bulletin*
225
Monthly Market Report & Press Summary*
210
2011 Sugar Year Book*
205
Providing updates on the world sugar Situation

Report on sugar and ethanol markets for the previous month
Hardback, 400 pages, 150 Country Tables with full details of production,
consumption, trade and stocks (7-8 yrs series)
Ethanol Year Book 2012*
180
Comprehensive statistics on fuel ethanol
World Sugar Balance*
Current forecast and historical data (7 years series) on

production, consumption, import and export
230
*ALSO AVAILABLE AS A SOFTCOPY
Tel: +44 20 7513 1144

1 Canada Square, Canary Wharf, London E14 5AA
Fax: +44 20 7513 1146 Email: publications@isosugar.org
Web: www.isosugar.org

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Outlook of Sugar and Ethanol

International Sugar Organization

Outlook of Sugar and Ethanol Production in Brazil

Market Evaluation Consumption and

The Outlook of Sugar and Ethanol Production in Brazil

30th March 2012

International Sugar Organization

Market Evaluation Consumption and

The Outlook of Sugar and Ethanol Production in Brazil

PART 1: THE BRAZILIAN SUGAR/ETHANOL INDUSTRY

SNAPSHOT OF BRAZILS CANE/SUGAR/ETHANOL PRODUCTION

PART 2: CANE PRODUCTION

CANE AREA AND YIELDS

PART 3: INDUSTRIAL PROCESSING

LEADING MILLING GROUPS

PART 4: DRIVERS OF BRAZILS COMPETITIVENESS IN

PART 5: BRAZILS SUGAR/ETHANOL SUPPLY AND

APPENDIX: PRODUCTION INDICATORS OF FOREIGN

International Sugar Organization

Market Evaluation Consumption and

The Outlook of Sugar and Ethanol Production in Brazil

International Sugar Organization

Market Evaluation Consumption and

The Outlook of Sugar and Ethanol Production in Brazil

Part 1: The Brazilian Sugar/Ethanol Industry

Sucrose yield Share of ATR for

Share of ATR for

2011/12 (e) 562.45

Source: ISO Ethanol Yearbook

International Sugar Organization

Market Evaluation Consumption and

The Outlook of Sugar and Ethanol Production in Brazil

2011 figures are preliminary

The latest assessment by Brazils Ministry of Agriculture (27 February 2012)

International Sugar Organization

Market Evaluation Consumption and

The Outlook of Sugar and Ethanol Production in Brazil

Part 2: Cane Production

International Sugar Organization

Market Evaluation Consumption and

The Outlook of Sugar and Ethanol Production in Brazil

Source: ISO Ethanol Yearbook

Cane Area and Yields

International Sugar Organization

Market Evaluation Consumption and

The Outlook of Sugar and Ethanol Production in Brazil

Industrial Cane harvested area (mln ha)

Industrial Cane harvested (mln tonnes)

Industrial Cane yields (tonne/hectare)

C/S - April/December; N/N - September/March

International Sugar Organization

Market Evaluation Consumption and

The Outlook of Sugar and Ethanol Production in Brazil

Fig. 1 - Cumulative rains April-January,

Box 1: Drought resistant cane

International Sugar Organization

Market Evaluation Consumption and

The Outlook of Sugar and Ethanol Production in Brazil

Sugar Cane Production Costs

International Sugar Organization

Market Evaluation Consumption and

The Outlook of Sugar and Ethanol Production in Brazil