--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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