FEATURE-Brazilian sugar industry moves into top gear


By Peter Blackburn

SERTAOZINHO, Brazil, Sept 23 - (Reuters) - Unlike the potholed roads that usually cut through Brazil's rural interior, the tollway linking Sertaozinho to nearby Ribeirao Preto is a smooth drive.

It scythes through vast fields of sugar cane and helps link some 40 mills that crush 25 percent of the national sugar cane crop and 10 percent of the world's sugar.

The Sertaozinho region is the center of the world's sugar cane industry, and the new road testifies to fresh investment in a business that is once again on the upswing.

"It's like California," said Eduardo Munhoz, director of international sales for sugar and alcohol at Smar, a Sertaozinho-based automated machinery maker, referring to the region's wealth and agricultural potential.

After a rough period of low prices and disruption following the deregulation of the Brazilian sugar market, sugar growers, processors and equipment suppliers feel upbeat again.

A record cane crop this year, a highly competitive exchange rate and a revamping of the fuel alcohol market have injected fresh sparkle into the sugar sector.

Last Thursday, raw sugar futures prices rocketed to near 8-month highs in New York, fueled by speculative purchases and trade buying, as well as talk that top producer Brazil may have oversold, but prices have since retreated on profit-taking.

The president of the Copercana cooperative of sugar cane planters of western Sao Paulo state, Antonio Eduardo Tonielo, said dry weather helped produce excellent quality sugar this year and that he was optimistic for 2003.

"Domestic alcohol sales are also strong," he said.,

Approval this week of a 500 million reais ($145 million) credit to stockpile up to 1 billion liters (264 million U.S. gallons) of fuel alcohol was the latest in a series of government support measures.

The President of the Santa Elisa mill, Maurilio Biagi Filho, said he believed that in the long term there would be an international market for fuel alcohol for vehicles.

"The world wants clean fuel and alcohol is best," he said, noting that alcohol prices were now one third of those for gasoline.


Sugar equipment suppliers at the 10th International Sugar and Alcohol Fair (Fenasucro) in Sertaozinho from September 17-20 were bullish about market prospects.

The fair, the world's largest for sugar and alcohol equipment, featured 225 exhibitors and attracted some 25,000 professional visitors, generating $100 million worth of new business, according to Augusto Balieiro, director of Ribeirao Preto-based Multiplus events company.

Smar, which supplies 80 percent of Brazil's 309 sugar and alcohol factories with automated machinery, estimated sales growth of 10 percent this year and forecast steady growth in 2003.

"Millers are investing to reduce costs and increase operating efficiency. Prospects are especially good for power cogeneration," said Smar's Piracicaba manager Fulvio de Barros Machado.

Smar's optimism was shared by Sertaozinho manufacturer TGM which saw strong growth in turbine sales to sugar mills planning to burn sugar cane waste, or bagasse, to generate electricity for sale to the national grid.

The investments are financed by the National Economic and Social Development Bank (BNDES).

"Everyone is investing in energy," said TGM Director Waldemar Manfrin Junior. He noted that seven projects that will generate between 30 to 45 MW each are lined up for next year.

Antonio Tonielo Filho, Director of Viralcool sugar mill and distillery, said he was planning to raise cane-based power generation to 25 MW next year, from the current 14 MW, mostly for external sale.

"We've got the raw material (bagasse), why waste it ?" he asked.

Agriculture Minister Marcus Vinicius Pratini de Moraes noted a buoyant mood this year in the sugar and alcohol sector.

"Brazil keeps beating production and productivity records," Pratini said at the fair's opening, adding that Brazil will continue to grow more sugar and other crops.

"No one will pay Brazilian farmers not to plant, they will continue to expand," he stressed, referring to farm set-aside programs in the European Union and the United States.



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