Brazil's sugar cane output growth: current drivers and outlook.

In 2007/08 Brazil's cane production rose by a record of over 60 million tonnes. As the additional cane crushed was almost entirely used for ethanol production, Brazil's impressive growth in sugar exports seen between the early 90s and 2006 has come to a halt. Rapidly growing domestic demand for ethanol is today the main driver of Brazil's cane processing sector, which struggled in 2007 with the lower world prices for sugar (sugar export earnings fell from USD 6.1 billion in 2006 to USD 5.1 billion in 2007). However, as ethanol prices gain competitiveness against fossil fuels, greater international demand for ethanol is also starting to have an impact. A strong level of inflow of foreign direct investment, private equity funding and mergers and acquisitions will continue to support the growth of the Brazilian cane processing sector over the coming years. Most of the new mills are opening in the country's Centre-South and occupying areas previously used for pasture, with states like Goias and Minas Gerais particularly increasing their share in the region's total output. Last season ten foreign companies (including companies with a substantial amount of shares in foreign ownership) processed 9% of Brazil's cane output (up from 6% in 2006/07), with two foreign groups - Tereos and Louis Dreyfus - appearing among Brazil's top 5 producers for the first time.