Sugar mills in top supplier Brazil are set to boost production next year as companies emerging from bankruptcy begin resuming output while others invest in operations, according to a forecast by BP Bunge Bioenergia SA.
The company, a sugar ethanol joint venture between oil major BP Plc and crop trader Bunge Ltd., expects mills in the Center-South region to produce 41.6 million tons of sugar in 2024, commercial director Ricardo Carvalho said in an interview. That is a 1.7% increase from the current harvest year, which itself is expected to be a record.
The addition of as much as 2 million tons of sugar-processing capacity next year comes as a number of mills resume or ramp-up operations after a long period of financial distress following inflation-control policies that hurt the sector about a decade ago. Strong sugar prices have also triggered a new wave of financial investments.
“Ethanol distilleries are adding sugar production, companies have invested in de-bottlenecks and idled mills are resuming activity,” said Tomas Cardoso, the JV’s director of strategy, business development and innovation. Some mills that went bankrupt sold old equipment that was reassembled and restarted, he added.
The expected boost in sugar production comes even as Brazil is unlikely to see a repeat of this year’s high crop yields that were fueled by good weather. BP Bunge forecasts mills will crush 612 million tons of cane in the coming year, 24 million less than in the current year, but ultimately produce more sugar as earlier bottlenecks disappear. Sugar-cane crushing will likely start earlier than usual, with mills kicking off in March rather than April, Carvalho said.
The world is increasingly dependent on Brazilian sugar to meet global demand amid a poor outlook for crops in India and Thailand. Raw sugar futures in New York are heading for a fifth straight year of gains in what would be the longest streak since the five-year period ending in 1989.