Record Global Sugar Supplies Change Brazil’s Utilization Mix

(WASHINGTON, DC) Last year global sugar production reached record levels, leading to a sharp and sustained drop in sugar prices on the world market. Lower global sugar prices have translated to diminishing returns for sugar producers. Brazil’s sugarcane sector has adapted to low returns for sugar exports by processing a higher share of sugarcane for ethanol production. About one-third of sugarcane harvested in Brazil’s main Center-South Region this year was crushed for sugar production, a substantially lower share than in the past decade. The remainder was processed into ethanol. This change in sugarcane usage represents a 26 percent decrease in sugar use and a 16-percent increase in ethanol use. In Brazil, hydrous ethanol has increased its market share against gasoline for the past several years, as most Brazilians drive flex-fuel vehicles (FFV), cars fueled by either gasoline or pure hydrous ethanol. This extensive use of ethanol is economically feasible as ethanol has grown increasingly competitive against rising gas prices. Increased ethanol production in Brazil also influences the U.S. ethanol market because Brazil is a major importer of U.S.-produced ethanol. Ironically, Brazil is the top importer of U.S. ethanol exports.