By Ana Ionova and Marcelo Teixeira
LONDON/SAO PAULO (Reuters) – Brazilian sugar companies are increasing their capacity to produce ethanol in the face of depressed global sugar prices and government policies expected to boost demand for the biofuel.
A shift to ethanol in the 2018-19 season slashed Brazil’s sugar output by 9 million tonnes to a 12-year low and more switching to the biofuel next season could help to wipe out a global surplus weighing on sugar prices.
Brazil could also lose its crown as the world’s biggest sugar producer to India for the first time in 16 years, according to the U.S. Department of Agriculture.
For Brazilian sugar cane processors, switching to ethanol has proved an attractive trade-off as the increased focus on the biofuel partly shielded mills from a plunge in global sugar prices in September to their lowest since 2008.
Executives at major Brazilian sugar firms Biosev (SA:BSEV3) and Usina Coruripe http://www.usinacoruripe.com.br/en, as well as smaller producers such as Usina Batatais http://us.usinabatatais.com.br and Usina Cerradao http://www.usinacerradao.com.br, told Reuters they were now investing in more ethanol capacity ahead of next season.