2010/2011: Brazil's Sugarcane Harvest That Would Have Been in 2009/2010

By Brazilian Sugarcane Industry Association unica, PRNE
Tuesday, March 30, 2010

Increased sugarcane, sugar and ethanol production should reflect what was not possible in the previous harvest, mainly due to unfavorable weather conditions

SAO PAULO, March 31, 2010 - Estimates compiled by the Brazilian Sugarcane Industry Association
(UNICA) project a 10% increase in sugarcane production in the 2010/11
harvest, which officially begins tomorrow (April 1) in the country's
South-Central region. UNICA's projected total sugarcane harvest should reach
595.89 million tons, compared with 541.50 million tons estimated for the
2009/10 harvest, which officially ends today.

According to UNICA's Technical Director, Antonio de Padua Rodrigues, the
increased harvest forecast has to be carefully evaluated. "The cane available
for ethanol and sugar production in the 2010/11 harvest is virtually the same
as in the 2009/10 harvest, which was severely hampered by unfavorable weather
conditions. In other words, in terms of crushing, the new harvest should be
what the industry was simply unable to complete in the previous harvest."

The data collected by UNICA, as well as satellite images of South-Central
Brazil, indicate that there was no significant expansion of the cultivated
area in traditional sugarcane regions. The expected increase in production
for 2010/11 can be attributed in part to a significant volume of "bisada"
cane (sugarcane that was not processed in the last harvest, therefore growing
for nearly two years) and to a lesser extent, the gradual increase in
production at new mills, especially in the states of Mato Grosso do Sul,
Goias and Minas Gerais.

In great measure, the slowdown in the expansion of the cultivated area
can be traced to delayed impacts of the global financial crisis in late 2008
as well as low prices experienced by the cane industry since 2007. These
factors led to a shortage of available capital and prevented numerous mills
from investing in additional planting over the last two years.

Quality of raw material

Long range weather forecasts for 2010 indicate a "wetter" than normal
beginning of the harvest, followed by colder, dry conditions during winter
months (July, August and September). This is the period where over 45% of the
cane is harvested in South-Central Brazil.

The expected weather conditions point to a greater increase in sugar
concentration than in the past harvest. But even with a probable improvement,
UNICA is projecting that the amount of total recoverable sugars (ATR in
Portuguese) for the 2010/11 harvest will remain below historical levels
because of three main factors:

    -- Advance of mechanized harvesting;
    -- Early launch of the harvest season by several mills that began
       crushing in March;
    -- High volumes of "bisada" cane to be harvested in 2010/11
       (Over 12% of available cane for the new harvest is cane that was not
       crushed in the past harvest)

Therefore, the amount of ATR per ton of cane should reach 138.59
kilograms, 6.3% higher than the 130.36 kilograms per ton that will likely be
the amount when final numbers for the 2009/10 harvest are compiled. In the
largest cane producing state, Sao Paulo, the historical average ATR per ton
of cane is 145 kilograms.

Status of sugarcane fields

Low prices paid at the mills in recent years and atypical weather
conditions in 2009 severely impacted the profile of the sugarcane crop to be
harvested in 2010/11. Besides high volumes of "bisada" cane, a significant
reduction is expected in the amount of first and second cut canes, which are
the most productive. Therefore, the proportion of older and less productive
cane is expected to grow.

Crop aging should reduce the prospect of increased sugarcane productivity
in 2010/11. This imbalance in sugarcane fields should also impact more
intensely the amount of cane available for the following harvest, in 2011/12.
That's because most "older" sugarcane (fifth or more cuts) represents nearly
25% of the sugarcane area in the Brazil's South-Central region. Planted areas
will need to be reformed (new planting), leading to a probable reduction in
the area available for harvest in 2011/12 in many regions.

"The industry will need to invest heavily in renewing sugarcane fields
this year, to ensure there is supply growth as of 2012," assesses Rodrigues.

New mills

UNICA estimates that 10 new units will launch their activities in the
2010/11 harvest. The figure is well below what has been observed in recent
years, reflecting the slowdown in terms of growth in the cane industry. There
were 25 new units in 2007/08, 30 in 2008/09 and 19 in 2009/10.

The new units expected for 2010/11 are located in the states of Minas
Gerais (3), Goias (2), Sao Paulo (2), Mato Grosso do Sul (1), Mato Grosso (1)
and Rio de Janeiro (1).

Sugar and ethanol production

Of the total cane volume expected for the 2010/11 harvest, UNICA projects
that 43.29% will be destined for the production of sugar, a slight increase
compared to the 42.57% observed in the final harvest figures for 2009/10.
Therefore, as in previous years, most of the cane crushed in the new harvest
(56.71%) will be used for ethanol production.

Sugar production in the new harvest is expected to total 34.09 million
tons, a 19.1% increase over the 28.63 million tons to be produced in 2009/10.
Ethanol production, in turn, is expected to reach 27.39 billion liters, up
15.6% over the 23.70 billion liters in the previous harvest.

Of the 27.39 billion liters of ethanol projected for 2010/11, 20.14
billion are expected to be hydrous ethanol, a total 15.40% higher than the
17.46 billion liters produced in 2009/10. The amount of anhydrous-type
ethanol should reach 7.25 billion liters, a 16.20% increase over the volume
produced in the last harvest.

Sugar and ethanol markets

Brazilian sugar exports are expected to grow at a slower rate than
overall production. While sugar production growth is expected to reach nearly
5.5 million tons, exports should advance only 3.3 million tons, reaching a
total of 24.3 million tons exported in the next harvest.

Every two years, there is a cyclical movement in the industry that
alternates export growth with increased production. In the 2010/11 harvest,
about 9.79 million tons of sugar should remain in the domestic market to
replenish inventories and meet domestic demand.

Contrary to what occurs in the sugar market, ethanol exports should
present a significant decline in the 2010/11 harvest, reaching 1.80 billion
liters compared to the 2.75 billion liters shipped in the previous harvest.
The drop is expected to reach 34.5% compared to exports in the previous

The increase in production combined with a contraction in exports will
result in an increase in domestic ethanol supply of more than 4.5 billion
liters (1.9 billion gallons) , which is sufficient to meet future internal
market demand.

It should be noted that motor vehicle sales remain strong, with Flex-Fuel
vehicles accounting for more than 90% of light vehicle sales in Brazil.
Projections indicate that by the end of the 2010/11 harvest, the Flex fleet,
which today represents 40% of the total fleet (Otto cycle), should reach 49%.
Considering ethanol production and export estimates in the new harvest, the
ethanol supply and demand scenario in the domestic market should remain

Final Numbers of 2009/10 Harvest

Final figures for the 2009/2010 harvest, which officially ends today,
will be presented on the next monthly news release updating the harvest, to
be released in the first half of April. Production and crushing values in
this release for the 2009/2010 harvest are preliminary estimates, subject to
minor adjustment when final figures are compiled.


The Brazilian Sugarcane Industry Association (UNICA) is the leading trade
association for the sugarcane industry in Brazil, representing nearly
two-thirds of all sugarcane production and processing in the country. UNICA's
priorities include serving as a source for credible information and analysis
about the efficiency and sustainability of sugarcane products, particularly
its biofuels. The association works to encourage the continuous advancement
of sustainable practices throughout the sugarcane industry and to promote
biofuels as a clean, reliable alternative to fossil fuels.

    CDN Comunicacao Corporativa
    Rosa Webster - +55-11-3643-2707 - rosa.webster@cdn.com.br
    Mariane dos Santos - +55-11-3643-2730 - mariane.santos@cdn.com.br

Rosa Webster, +55-11-3643-2707, rosa.webster at cdn.com.br; or Mariane dos Santos, +55-11-3643-2730, mariane.santos at cdn.com.br, both of Brazilian Sugarcane Industry Association (UNICA)

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