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December 21, 2018

E100 Ethanol production surges in Brazil, Sugar Production declines

Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.

As the 2018/19 sugarcane harvest comes to an end in Brazil, it is obvious that mill operators put much more emphasis on ethanol production this year at the expense of sugar production.

In its third evaluation of the 2018/19 sugarcane crop in Brazil, Conab reported a record production of ethanol in Brazil. Total ethanol production in 2018/19 is expected to be 32.3 billion liters, which represents an increase of 18.6% compared to last year. This surpasses the previous record of 30.5 billion liters produced during the 2015/16 growing season.

The big increase in production was for hydrous ethanol, which is sold as pure ethanol or E100. Hydrous ethanol production was estimated at 21.6 billion liters, surpassing the old record of 19.6 billion liters set during the 2010/11 growing season. Anhydrous ethanol production, which is ethanol blended into gasoline, declined by 2.3% this year.

The big loser this year was sugar production estimated at 31.7 million tons, which represents a decline of 16.2% compared to last year. Due to low international sugar prices, many mill operators switched their operations to only produce ethanol.

The total sugarcane harvested acreage in 2018/19 was estimated at 8.6 million hectares (21.2 million acres), which was a decline of 1.1% compared to last year. In southeastern Brazil, which is responsible for approximately 90% of Brazil's total sugarcane production, the sugarcane acreage declined due to poor weather and the reduction of land rented for sugarcane production.

Sugar/ethanol mills in Brazil continued to close their doors due to financial hardship and the land that was previously rented by the mills to produce sugarcane has migrated to primarily soybean production. Additionally, some mill operators have opted to grow soybeans for one year in-between the time they renovate their sugarcane fields. Sugarcane needs to be replanted every 5-6 years or the yields start to decline.

Brazil's total sugarcane production in 2018/19 is estimated at 615.8 million tons, which is down 2.8% compared to last year. The sugarcane harvest in Brazil usually starts in March or April and it ends in November or December. Sugarcane is usually not harvested during the summer rainy season, which runs from December to March.