Industry Trend Analysis - Record Push Towards Sugar In 2017, Away From Ethanol - JAN 2017


BMI View: Brazilian sugar mills will focus on crushing cane into sugar rather than ethanol over the coming quarters. Brazilian sugar prices are currently trading at all-time highs , driving a rebalancing away from ethanol and towards sugar at an unprecedented scale. Brazilian sugar holds strong export opportunities out to 2020 as the global market will remain in deficit and demand from Asia will increase.

Brazilian sugar mills will focus on crushing cane into sugar rather than ethanol over the coming quarters, which underpins our forecast for Brazilian sugar output to grow by 2.2% y-o-y to 37.0mn tonnes in the 2017/18 season. The outperformance of sugar prices over ethanol on the domestic market is the key driver behind Brazilian mills' strong push towards sugar ( see graph below).

The 2016/17 sugar season is now over in Brazil and the country is entering the inter-harvest period, with the 2017/18 cane crop coming on line in April 2017. Positive growth in sugar output for 2017/18 will contrast with a likely lower cane crop as Brazilian cane fields suffer from years of underinvestment, with sugar companies neglecting to replant and thus constraining cane yields.

Strong Sugar Price Performance To Drive Increased Crushing
Brazil - LHC: BMI Sugar (mn tonnes) & Conab Ethanol Production (bn litres) & Cane Diverted To Sugar (%). RHC: Sao Paulo Prices For Sugar & Ethanol (Rebased).
LHC: Note: e = BMI/Conab estimate. f = BMI forecast. RHC: Note: January 2015 = 100. Source: Conab, CEPEA-E salq , Bloomberg, BMI

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