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Large Brazil Mill Favoring Ethanol Over Sugar This Season
USAgNet - 06/24/2021

Sao Martinho SA SMTO3.SA, a large Brazilian maker of sugar and ethanol, said it plans to produce more of the cane-based biofuel and less sugar from its 2021/22 crop.

Sao Martinho said late on Monday it intends to use 58% of the cane to make ethanol, up from 53% for the last crop.

"We believe ethanol prices will stay at a higher level along the season compared to the previous crop, a result of higher oil prices and the recovery of fuel sales in Brazil," the company said.

According to Reuters, the guidance from one of the five largest sugar cane processors in Brazil is somewhat surprising as analysts have been expecting mills to keep a strong focus on sugar production in the new crop, basically repeating the production mix seen last season.

Another large Brazilian sugar & ethanol company, Copersucar, said on Tuesday that it does not see the production mix changing much.

Copersucar said the average allocation of cane to sugar production from its 33 associated mills will be between 44% and 45% in 2021/22, compared to 46% in 2020/21.

"Mills are well advanced in sugar hedging, so there is a limitation on changes towards ethanol," said Tomas Manzano, Copersucar's Chief Strategy Officer.

Manzano said that a mill would probably need to buy back its position in New York's futures to shift more cane towards ethanol, but that might not be profitable.


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