The next sugar cane crop in Brazil’s Center South, the main producing region of the world’s largest grower, may be similar to the current one, according to Marcos Jank, president of industry group Unica.
Sugar cane output in the area fell for the first time in a decade in the 2011-12 season after dry weather, frost, flowering and old age of the cane cut yields. Production through Feb. 15 was 494.3 million metric tons, down 11 percent from a year earlier, Unica estimates. The 2012-13 crop in Brazil starts next month.
“This year won’t be much different,” Jank said in an interview at a conference in London today. “This harvest has the same characteristics of the last as we are still paying for weather-related problems and the industry consolidation process that resulted in companies not expanding greenfields.”
Output in the 2012-13 season could still climb “a little bit,” he said. The potential gain would be far from enough to meet the potential increase in demand, according to Jank.
Production will rise to 500 million tons, Macquarie Group Ltd. estimates. That’s down from a previous forecast of 520 million, analyst Kona Haque, said in a report e-mailed today.
Sugar cane replanting rates are near 17 percent to 18 percent, Jank said, adding that field renovation was back to “normal levels.” Replanting rates were as low as 10 percent some years ago, he said, without giving a timeframe.
Lack of Investment
“This year will be the second in which we will pay for the past and after that we will start to see this new replanted cane in a bigger scale,” he said, referring to a lack of investment in the sector over the past years.
Brazil will need 100 new mills by 2020 to keep its 50 percent market share of the world sugar market, Jank said. That would equate to an investment of $90 billion in the sugar and ethanol sector, according to Jank.
“The challenge is not to recover the fields affected by the drought, as it makes financial sense to do that quickly,” he said. “The difficulty is to expand existing mills and build new ones.”
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