SAO PAULO (Reuters) - Large companies operating in the sugar and ethanol sector in Brazil are investing to expand capacity to produce the biofuel, due to the continuing strong local demand and low global sugar prices, said an executive from a leading industry group on Monday.
According to Antonio de Padua Rodrigues, technical director for Unica, Brazil’s largest association representing sugar and ethanol companies, groups controlling several plants in Brazil are building new distillation installations in some of their sites to be able to produce more ethanol next year.
It is a similar development to what happened last year, when several companies, including Biosev and Usina Coruripe, invested to expand ethanol production capacity.
“I’m aware of plans from some large groups,” Rodrigues told reporters on the sidelines of the Novacana Ethanol Conference 2019, declining to name the companies involved in the projects because he was not in position to speak for them.
“This could drive the production mix next season to an even smaller share for sugar,” he said, referring to the production strategy by mills that are flexible regarding the amount of cane they allocate for sugar and for ethanol production each year, depending on their market prices.
Last year, mills allocated only 35% of the cane to produce sugar, an all-time low. That share could fall a bit more in the current season, according to the latest production report by Unica, which put the mix below the 35% mark with only about a third of the crop left to be processed.
Ethanol consumption is rising for a second year in a roll in Brazil as the product maintains a large price advantage over gasoline at the pumps.
Brazil’s center-south region produced near 10 million tonnes less sugar last year, and is headed to cut another 10 million tonnes this season, helping to reduce a global surplus blamed for the lowest sugar prices in a decade in 2019.
Brazil will start a new program to stimulate biofuels use in 2020, called RenovaBio, which could further strengthen the local demand.
Reporting by Marcelo Teixeira; Editing by Marguerita Choy