Total cane crushing in the South-Central region of Brazil since the beginning of the 2009/10 harvest exceeded 527 million tons by the first half of January. Total production reached 28.37 million tons of sugar and 22.90 billion liters of ethanol. Despite unfavorable weather conditions, crushing will continue in the second half of January, usually an off-season period, at more than 80 mills.
 
The totals so far are lower than initially projected for the current harvest. Under normal conditions, cane crushing could have reached 580 million tons, which would have resulted in sugar production exceeding 33 million tons while ethanol would surpass the 27 billion liter mark.

Initial figures for the current harvest, originally projected by the Brazilian Sugarcane Industry Association (UNICA) in early 2009, reflect the seriousness and responsibility of producers in their effort to offer sugar and ethanol for both the domestic and export markets. The beginning of the harvest was, in some ways, the most worrisome period because of a combination of excess product and growing domestic demand, brought on by the rapid expansion of the flex-fuel fleet as well as market uncertainties.

Although everything seemed aimed at a record season for cane crushing and sugar and ethanol production, it is noteworthy that many companies had difficulty obtaining credit from the financial system. This meant that these same companies were not able to obtain lines of credit (market-regulating stocks) made available by the Federal Government for the same reasons. Many were unable to meet a series of demands for the approval of funds. This scenario led to heavy ethanol sales during several months of the harvest (April to September) beyond existing demand and a t very low prices, which caused a 25% increase in hydrous ethanol sales when compared to the same period a year before.

Since July, the harvest has been strongly affected by unseasonably heavy rains, resulting in a supply reduction of over 4.0 billion liters of ethanol and 5.0 million tons of sugar. Since September, UNICA has been indicating that this imbalance between supply and demand would cause a market adjustment, which would then result in new price levels compatible with lower than expected supplies.
 
As of January and according to UNICA’S expectations, the market has been undergoing adjustments, with current price levels already reflecting some stability. The first half of January saw a 10% drop in hydrous ethanol sales compared to the second half of December and an increase of only 2.4% compared to the first half of January 2009. The increase at this time would be naturally higher, had it followed the expansion in the number of flex-fuel vehicles on the road.
 
Between January and March of 2009, ethanol was available at 70% or less than gasoline prices in 18 Brazilian States. The 70% threshold is generally recognized as the ceiling at which ethanol remains competitive with gasoline. By the first half of January 2010, only two States are still offering ethanol at competitive prices, at or below 70% of the price of gasoline. Still, it should be noted that considering the entire harvest, the average price for the 2009/10 harvest is among the four lowest averages of the past 10 years.

For the latest comparative data on the cane harvest, click here.