CS Brazil’s harvest breaks records

Following poor weather conditions in Brazil last year, which affected the cultivation of the nation’s sugarcane, this year’s CS Brazil harvest is set to reach an all-time high.

The UK’s oldest sugar trader Czarnikow has reported that around 590 million tonnes of sugarcane is set to be crushed this year, increasing production by 17% to 33.5 million tonnes.

However as a result of the fallen sugar and ethanol prices expected earnings are set to have far reaching consequences as the sector had been hoping for better returns to pay for the renovation of older sugarcane supply and the upgrade of crushing capacity.

Czarnikow’s latest sugar review has examined the impact of the record crush on the market. The review explains that the recent 60% drop in sugar prices since February 2010 could create an opening that would see a significant growth in the ethanol market, following an earlier shift in the sector towards sugar as its returns were above ethanol.

The report predicts that the domestic demand for ethanol will experience an increase of 3.5 billion litres (15%) as the flex-fuel car fleet continues to grow. Today, around 90% of all new cars now employ this technology.

However this increase in production is not expected to translate into an increase in export capacity, with an upsurge totalling no more than 2 million tonnes. 2010 and 2011 will be difficult years. If the cost of sugar does not improve the rise in production that we are seeing this season could be reversed in 2011 and 2012 as the sector struggles to find capital to replace aging cane.

Czarnikow’s head of analysis Toby Cohen commented: ‘The start of crushing in CS Brazil is always a pivotal time in the sugar market, and especially so this year following the shortfall in supply during the previous season. Although we are heading for a record 590 million tonnes, the poorer earnings will have far reaching consequences as the market is now back to levels that do not support growth.’

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