(Adds industry background including details on Brazilian sugar and ethanol production mix, comments by Cosan CEO)
By Nayara Figueiredo
SAO PAULO, March 9 (Reuters) - The sharp fall in global oil prices should result in higher sugar production in Brazil in the new crop that starts in April, Ricardo Mussa, the incoming chief executive officer of the world’s largest sugar producing company, Raízen, said on Monday.
“There was already the intention to raise sugar production this year, and oil’s price fall boosts that plan,” Mussa told reporters after a presentation to investors and analysts organized by Cosan SA, which owns 50% of Raízen, a 50-50 venture in which Royal Dutch Shell Plc holds the other half.
Most Brazilian mills have flexibility to adjust their production plans between sugar and ethanol, depending on the prices for both products, by earmarking more cane to produce one or the other.
They produced much more ethanol than sugar in the last two seasons as the price for the fuel in Brazil was generating better financial returns in a period of low global sugar prices. That outlook is changing for the coming crop.
Lower oil prices will likely result in lower gasoline prices in the Brazilian market, reducing ethanol’s competitiveness since both fuels compete for drivers’ preference at the pumps. Raízen is the largest ethanol producer in Brazil.
Mussa expects sugar production to increase by 3 million to 6 million tonnes in the country in the new crop, compared with the previous one. Brazil and India are the world’s largest sugar producers.
Marcos Lutz, the chief executive of Cosan SA, said the company was not seeing much impact on demand for sugar due to the coronavirus crisis. But he said fuel consumption in Brazil could be negatively impacted if the country’s economy suffers as a result of the outbreak.
Reporting by Nayara Figueiredo in Sao Paulo Writing by Marcelo Teixeira in New York Editing by Chizu Nomiyama and Matthew Lewis