--Brazil's Raizen sees coming center-south sugarcane crop at 560 million to 580 million tons.

--Sugar profitability a concern, but Raizen executive doesn't see prices falling below 18 cents a pound.

--Dubious outlook for ethanol; energy segments led Raizen to reduce its five-year growth targets.

 
   By Paul Kiernan 
 

SAO PAULO--Top Brazilian sugar and ethanol producer Raizen expects the country's main center-south sugarcane region to harvest a record crop of between 560 million and 580 million metric tons next year, the head of the firm's upstream business said Wednesday.

Brazil's current 2012-13 crop, which began in April and is now more than two-thirds harvested, is expected to yield 518.5 million tons of cane, according to the latest estimate from industry association Unica.

Experts say sugarcane growers have stepped up investments in their fields this year, likely raising productivity potential for the coming crop. But there's plenty of time for weather to significantly alter the outlook, Raizen executive vice president Pedro Mizutani said Wednesday.

"It's still early to say," Mr. Mizutani told Dow Jones Newswires on the sidelines of a conference. "If it had rained well in February and March of this year, we'd be looking at 540 million tons of cane from [the current] crop."

With sugar futures trading just above 20 U.S. cents a pound, prices aren't much higher than production costs in Brazil, the world's top supplier of the sweetener, analysts say. Mr. Mizutani said profitability will "definitely" be a concern for Brazilian mills next year, with the global sugar balance expected to remain in surplus territory.

"What has sustained the sector since 2008 has been sugar," he said, adding that he doesn't see prices for the sweetener falling below 18 cents a pound.

About half of the sugarcane crushed in center-south Brazil is used to produce sugar and the rest goes to ethanol, though mills have some flexibility to tweak the balance. Biofuel has become the less profitable product in recent years, as mills aren't able to raise prices in the domestic market due to government-fixed gasoline prices.

Raizen, a joint venture launched in 2011 between Brazil's Cosan SA (CZZ, CSAN3.BR) and Royal Dutch Shell PLC (RDSA, RDSA.LN), scaled back its five-year growth target at the end of the year because of the outlook for its ethanol and energy segments, Mr. Mizutani said. The firm now plans to increase annual sugarcane-crushing capacity to 80 million tons by 2017 from 65 million tons currently. Raizen had previously hoped to be crushing 100 million tons of cane by then.

"The economics aren't coming together," Mr. Mizutani said.

But the Brazilian sugarcane sector, once dominated by family-owned mills and small groups, has undergone deep changes in recent years as foreign players have moved in and the weakest companies have gone out of business.

"We don't have much fear," Mr. Mizutani said. "The smaller companies are going to suffer. The companies that haven't professionalized are going to suffer a lot."

Write to Paul Kiernan at paul.kiernan@dowjones.com

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