The plunge in oil prices to multi-year lows could have a sour aftertaste for Brazilian sugar processors.
“> […] The drop in crude prices may spell even more trouble for one of the mills’ two chief products: ethanol. Processors have ramped up production of the biofuel as a way to generate revenue as sugar prices plunged. But now that alternative may lose its luster if cheap gasoline gets in the way. Ultimately, it may push more sugar on the market.
Raw sugar futures on ICE Futures U.S. recently fell 1.6% to a more than six-week low of 15.68 cents a pound. […]
Brazil is the world’s top producer of cane-based ethanol and cane processors have been dedicating more of their cane to produce the biofuel as an alternative to producing sugar, which has slumped in price.
Since Brazil’s cane harvest began in April, mills in the center-south – Brazil’s main cane-growing region – have dedicated 56.1% of their cane to make ethanol, and the rest to make sugar, compared with a 54.7%-45.2% split at the same point last year, according to sugar-industry group Unica.
“If gasoline gets cheaper, it affects ethanol’s competiveness in the blend,” said Jack Scoville, a vice president at Chicago brokerage Price Futures Group. […]”<