Informa Economics FNP - Platts

25/01/2012 - High prices to boost Brazil's 2012-13 ethanol output: analyst

London (Platts) - Record high prices should help Brazil's flagging ethanol production rebound in the upcoming 2012-13 (April-March) marketing year, a top analyst with Informa Economics FNP told Platts.

First estimates from the analytical company peg ethanol production between 21.5-22.8 billion liters, an increase of 4.6% or 10.9% from the 2011-12 figures.

"Weather conditions, changes in the sugar market and government regulation will be key factors to watch, and can impact our projections," Sao Paulo-based analyst Marcio Luiz Perin said in an interview.

Brazilian ethanol prices, which hit their strongest levels in a decade during the 2011-12 season, will encourage mill owners to broaden the use of more efficient technology, Perin said.

Brazil, the world's second largest producer of ethanol behind the US, has been unable to keep output of the sugarcane-based biofuel in line with fast growing consumption as weather-ravaged crops slashed yields.

Ethanol output in country's main center-south production region tumbled 20% in 2011-12 compared to the previous year, trade group UNICA said, forcing Brazil to import over 1.1 billion liters of the biofuel from the US.

This led prices to jump more than 30% from April through November 2011 compared to the year-ago period, according to data from research institute CEPEA/ESALQ.

A lack of investments to replant aging and less productive sugarcane fields have also contributed to the lower quality of crops, analysts say.

For the upcoming season, Informa Economics FNP estimates a 17% renewal rate with an addition of 2% to 3% in growing area.

Also, there has been a wider adoption of pest and weed control methods, and more adequate fertilization, Perin said.

"With prices so high is it just natural to see a wider adoption of more efficient technologies," he said.

These measures should boost sugarcane output in Brazil's center-south to anywhere between 510-535 million mt, up from 492 million mt in 2011-12, but still significantly below Brazil's record crop of 560 million mt in 2010-11.

"Our estimates don't account for severe weather conditions like the ones we had in the last crop. Our expectation is that the weather will be more favorable, but it still too early to say," Perin added.

Fonte: Platts

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