Brazilian Sugar and Ethanol Industry
In 2011/2012 crop, Brazil crushed 558 million tons of sugarcane, which resulted on a production of 35.8 million tons of sugar and 23.0 million m³ of ethanol. About two thirds of the sugar produced in the country, nearly 24.2 million tons, were destined to the international market. The raw sugar, however, corresponded for about 75% of the international market sales.
Sugarcane is cultivated in two main regions of Brazil: the Center-South region, including the South, Southeast and Center-West regions, encompassing the states of Paraná, São Paulo, Minas Gerais, Rio de Janeiro, Espírito Santo, Mato Grosso do Sul and Goiás; and the North-Northeast region, encompassing the states of Alagoas, Pernambuco, Paraíba, Sergipe, Rio Grande do Norte and Bahia. There are two harvesting periods in Brazil, one in each region, and the land on which sugarcane is cultivated accounts for 2.2% of Brazil’s total fertile land, or approximately 7.8 million hectares. In the Center-South region, the harvesting period runs from March to October (as of the commencement of the 2006/2007 harvest, whereas prior harvests ran from April to November of each year), whereas in the North-Northeast region, it runs from September to March.
Brazil’s vast territory and favorable climate provides a large supply of available land for sugarcane production. Brazil’s favorable conditions permit sugarcane to be harvested five to six times before requiring re-planting, compared to other countries, such as India, where, on average, sugarcane needs to be re-planted every two to three harvests. Brazil is the world’s largest producer of sugarcane, followed by India and China, having produced 569 million tons during the 2008/2009 harvest. The planting and harvesting of sugarcane is significantly less costly than planting and harvesting sugar beet, which has one annual crop, needs to be re-planted every year and requires crop rotations every three to five years.
World Sugar and Ethanol Industry
Sugar
Sugar is a staple consumer product and essential commodity produced in various parts of the world. Sugar is primarily derived from sugarcane and sugar beet, with sugarcane accounting for more than 70% of the world’s total sugar production. Sugar has agricultural and industrial applications and its production is both labor and capital intensive.
Sugar production has doubled since the early 70´s, from nearly 71 million tons of raw sugar, during 1971 crop, to nearly 160 million tons of raw sugar during the 2010/2011 crop year. The consumption growth led to a higher sugarcane production around the world. In 2011/2012 crop year, Brazil crushed about 558 million tons of sugarcane, which resulted in a production of 35.8 million tons of sugar. São Martinho Group believes that the consumption of sugar is likely to continue to grow due to overall population growth, increasing purchasing power of consumers and increasing worldwide consumption of processed foods as a result of the widespread migration from rural to urban areas. The Group therefore believes that the greatest growth in per capita sugar consumption will be in Asia, where per capita earnings and population migration are moving up rapidly.
Ethanol
Although the world had a growth of more than 200% on the ethanol production during the last years, from nearly 28 million m³ in 2000 to almost 90 million m³ in 2010, the market is still considered at an early stage of world development. About 75% of the all ethanol consumption in the world is used as fuel.
Ethanol is a cleaner fuel than gasoline. It is a clean and biodegradable fuel, and its manufacturing and burning are not believed to increase the greenhouse effect. Ethanol’s high oxygen content reduces carbon monoxide emission levels as compared to the carbon monoxide levels emitted from the burning of gasoline, according to the U.S. Environmental Protection Agency. Ethanol blends also reduce emissions of hydrocarbons, a major contributor to the depletion of the ozone layer. As an octane enhancer, ethanol can also cut emissions of cancer-causing benzene and butadiene. Environmental concerns and initiatives are raising awareness of the need to reduce world consumption of fossil-based fuels and adopt cleaner fuels, such as ethanol. One example is the Kyoto Protocol, an agreement on global warming reached in 1997 by the United Nations Conference on Climate Change in Kyoto, Japan that became effective on February 16, 2005. Under the Kyoto Protocol, major industrial nations have pledged to reduce their emissions of carbon dioxide and five other greenhouse gases between 2008 and 2012. A total of 165 countries have ratified the agreement. Global initiatives like the Kyoto Protocol are expected to increase the demand for ethanol over the next years.
