Tereos believes in a 2022/23 harvest rebound after a drought-stricken season

With plants located in one of the most affected regions by last year’s drought in the Center-South of Brazil, the Brazilian subsidiary of France-based Tereos will still hear the echoes of the bad weather in 2021 for the remainder of this year. Despite this, Tereos anticipates that the upcoming harvest season (2022/23) will be the start of a recovery process that might take up to two further seasons to complete. Tereos expects sugar and ethanol exports to put the company on this track.

In the 2021/22 harvest season, which ended in March, Tereos’ eight plants in Brazil processed 15.6 million tonnes of sugarcane, 25% less than in the previous season. Compared to the last cycles’ average, the volume was still 20% lower.

The fall was essentially determined by the effects of drought and three episodes of frost that affected crop productivity.  According to Pierre Santoul, CEO of Tereos Brazil, occasional fires also affected crops, though the incidence of fires last season wasn’t above the historical average.

The challenge now will be to ensure some productivity comeback in the face of rising expenses of crop maintenance and sugarcane planting. Currently, the business expects the crushing of 17 million tonnes of sugarcane, which is still below the historical standard.

Favorable sugar prices should support the company’s recovery – a scenario ensured, recalls Santoul, by geopolitical turmoil. “Thanks to the military conflict in Ukraine, the sugar price prognosis remains favorable for exports. World supply and demand dynamics point to a production surplus,” he says.

See below the track record of Brazilian sugar exports from January 2021 to March 2022. The data are from DataLiner.

Brazilian sugar exports | Jan. 2021 – Mar. 2022 | WTMT

Source: DataLiner (click here to request a demo)

Given the volatility of the local fuel market, the company’s assessment of the international ethanol market is hazier. As a result, Tereos intends to raise the percentage of cane allocated to sugar production for the time being, from 62 percent in the previous harvest to 65 percent in this one.

To further reduce its vulnerability to the uncertain domestic ethanol market, especially in an election year, Tereos plans to raise its biofuel exports in the 2022/23 harvest, as it is now certified to sell to California. In addition, the firm received the lowest carbon intensity score among the Brazilian sugarcane mills registered under the new US State government policy in March. Europe and Asia are two other overseas markets considered by the company.

Source: Valor Econômico

To read the full original article, please go to:

https://valor.globo.com/agronegocios/noticia/2022/05/04/depois-da-seca-tereos-preve-recuperacao-na-safra-2022-23.ghtml

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