Brazil is one of the world’s largest cane growers. Mills can use this cane to make sugar for food or ethanol for use as a road fuel. Brazil’s economic growth has led to an increase in fuel consumption, requiring an increase in gasoline and anhydrous ethanol production and imports.
Our client, the Canada Pension Plan Investment Board (CPPIB), asked us to provide an overview of the Brazilian sugar and ethanol market with a particular focus on sugar and ethanol prices in the domestic and international markets.
CZ Approach
We used in-house and external expertise:
- In-house and external data sources to model supply availability for sugar and ethanol demand.
- Our Sao Paulo office in Brazil was able to conduct research into refinery and distillation capacities of local Brazilian mills.
- Interviews with on-the-ground Brazilian sugar mills and exporters as well as ethanol experts.
CZ Solution:
Delivered a comprehensive market overview study to our client, enabling them to understand the dynamics between Brazilian ethanol and sugar markets. This allowed them to assess prospective physical asset investments related to biofuel production.
Outlook
Global sugar consumption is steadily increasing and there are concerns that Brazil’s sugar supply won’t be able to meet global demand unless current assets are upgraded.
There are also concerns that, in the long term, Brazil can’t meet both world sugar demand and domestic ethanol requirements with current production assets. Notwithstanding, with the exception of 2017 and 2018, Brazil has been a net ethanol exporter.
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