Brazil's Pernambuco 2016-17 sugarcane season begins; more sugar expected: sources

17.08.2016

Brazil's Pernambuco state 2016-17 sugarcane season started with two mills operating Tuesday and one due to start Wednesday, a sugar industry official said Tuesday.

"Last season 16 mills operated in the state and the same number is expected to operate this season," said Marcelo Guerra, the Pernambuco superintendent of sugar industry association Sindacucar.

Olho D'agua, Petribu and Sao Jose mills are starting operations in the region.

Pernambuco is the second largest sugarcane producer in the North-Northeast region of the country. In the 2015-16 season, the state crushed 11.4 million mt of cane and produced roughly 822,000 mt of sugar and 350.5 million liters of ethanol, data from the agriculture ministry, or MAPA, showed.

The amount of cane crushed in Pernambuco represented 23% of total cane crushed in the North-Northeast, where 14 states produced sugarcane.

For 2016-17, the expectation for Pernambuco is 13.4 million of cane crushed, up 17.5% on the year, but it may be revised due to a drought in the region, Guerra said.

Cane's total recoverable sugar, or ATR, is expected to be higher this year, above 130 kg/mt of cane. "But it will depend on weather and if the La Nina phenomenon forecasted for the region next months will bring rains," Guerra said. Last season the ATR was 128.3 kg/mt, MAPA data showed.

With higher sugar prices this season, mills in the key Center-South region have allocated more sucrose to produce sugar rather than ethanol. The 2016-17 season in Center-South started April 1. The same trend is expected for the season in the North-Northeast.

Sindacucar expects that more than 60% of the cane will be allocated to produce sugar this season and the balance will be for ethanol.

In the 2015-16 season, the percentage of cane directed to sugar was 59% in Pernambuco, data from MAPA showed.

Sugar production in Pernambuco this season is expected to reach about 1 million mt, according to analysts at Kingsman, an agricultural analytics unit of S&P Global Platts.

The forecast for higher production this season seems unlikely for the Olho D'agua mill.

"We were very excited, but now it has been 40 days that it has not rain in the region," said Alcemilton Sabino Maciel, commercial director of Olho D'agua.

"Our expectation was that we would crush 1.75 million mt of cane, but now we don't know if we will manage to crush 1.5 million mt," Maciel said. "There is little sugarcane."

Maciel said sugar production was expected to reach 3.3 million bags of 50 kg each, but now the expectation is 3 million bags. Of the total sugar production, 50% is expected to meet demand in the domestic market and 50% the export market.

Olho D'agua expects that ethanol production will reach 30 million liters and all the volume to meet domestic demand.

JB mill, another big producer in the state, said it will start operations in the first week of September. Preliminary estimates point to a total of 1.25 million mt of cane to be crushed, said Celido Ricardo da Silva, JB's commercial director.

JB expects sugar production this season will reach 1.6 million bags, from roughly 850,000 last season. Nearly 750,000 bags will go to meet domestic demand and the balance to export market.

"We will test our industry capacity for sugar this season," da Silva said.

As for ethanol, JB expects to produce a bit more than 60 million liters this season, from a bit lower than this volume produced previous season.

Both anhydrous and hydrous ethanol prices in the region have been lower than expected owing to ethanol imports from the US this month, Ricardo said.

Ex-mill anhydrous price is around Real 2,000/cu m, while hydrous is at Real 1,840/cu m.

"Prices are expected to increase as of November, when imports cease," he said.

For the whole North-Northeast region, preliminary estimates from local producers showed that the amount of cane crushed this season would reach 55 million mt, up 12% from previous season.

Despite the increase, it is still far from the record in the 2011-12 season of 66.1 million mt.

Last year, the region suffered from the drought, which prevented cane growth, and the amount of cane crushed in the 2015-16 season was 20% lower than 2014-15. Data from weather forecaster Somar showed it rained only in June, July and part of December.

Official estimates for the season in the whole North-Northeast will be released this week.

ETHANOL IMPORTS

The region is a net importer of ethanol as its local fuel demand is much higher than its production. In the first half of the year, ethanol fuel consumption (anhydrous and hydrous) amounted to nearly 300 million liters, data from the National Petroleum agency showed.

In 2015, Pernambuco imported from the US 17 million liters of ethanol, while in the first seven months of 2016 no imports were recorded.

Sources said at least four vessels from the US with nearly 20 million liters each are heading to Suape port in Pernambuco in August and September. This is because the state government on August 1 waived the 23% ICMS tax on imports until the end of September.

The Center-South region is also supplier of ethanol for the region.

The biofuel hydrous is used in flex-fuel vehicles, while anhydrous is blended with gasoline at a proportion of 27%.



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