• NNE region starts the new 2020/21 season;
• Expected increase in sugar availability – production forecast at 3.5mmt;
• Ethanol imports and transfers still needed;

New season starting in September

• The cane season in the NNE region of Brazil follows a different calendar than the CS;
• Now in September, the 2020/21 crop officially starts in the Northern part of Brazil.

Crop Calendar for Cane in Brazil

• Reports from millers in the region is that the 2020/21 season should report another year of recovery.
• Weather was good for cane development, leading to an expected increase in agricultural yields.
• Our initial estimates points to a 56mmt crush – 5% higher yoy.

NNE Cane Crush – another season of recovery for the region

Change in Strategy

Sugar Mix – back to sugar

• After 2 seasons of maximizing ethanol output, the NNE region is expected to go back to sugar.
• With the excellent returns of sugar, sugar mix should reach 48.6% – with a potential upside.
• This results in sugar production of 3.5mmt – the highest of the past 6 years.

• The increase in sugar production means the region has more sugar available for exports.
• As such, we expect a 20% increase in exports from NNE, out of which the majority is raw sugar.

NNE main raw sugar destinations – North America is among the main destination for NNE sugar

•  The main destinations for NNE sugar have been United State and Canada.
• In the US, NNE sugar can enter under TRQ without paying duty – current 2020 quota for the region is for 152kmt.

Deficit in Ethanol

• NNE has a total ethanol demand of almost 5bi litres annually.
• This means that, the region has an ethanol deficit of around 2.5bi litres.

NNE Ethanol Prod & Cons – the region has a deficit that is solved via imports and transfers from CS

• Part of this deficit is resolved via transfers from CS, and other part from ethanol imports.
• NNE is actually a big market for American ethanol, with the region importing over 900mi litres last year – even with an import tariff of 20% on ethanol exceeding a 750mi litres quota.

NNE Ethanol Imports – huge volumes entering the region forced the government to act

• Until this month, up to 750mi litres of ethanol imports could enter the country duty free. The volume that exceeded the quota was subject to 20% duty.
• Now, recent reports say the government has eliminated the quota volume and all ethanol imports will be subject to the 20% import tariff. 

Crop Summary Table