Argentina: Sugar Hits Records
16 April 2007 Despite growing domestic demand, strong growth in production, with three record years in a row, is resulting in abundant export surpluses in the country, according to the US Department of Agriculture’s Foreign Agriculture Service (USDA-FAS).
Domestic sugar production for 2007/08 is forecast at 2.68 million MT (raw value), the highest ever. Due to very good weather, improved returns following the Argentine peso devaluation, and attractive world sugar prices, mills and cane producers continued to invest in expanding production and improving efficiency.
At the farm level, most producers have renewed their cane plantations, adopting newer, more productive varieties. They have also managed plantations adequately, with optimal levels of fertilization and use of agricultural chemicals for weed and pest control. New and modern harvesters have been incorporated, allowing the harvest of green cane, avoiding the burning of plantations.
Although there are no official data, sources estimate that between 30,000-40,000 hectares (Ha) more were planted in the last few years. In the case of Tucuman, most of the newly incorporated area came from soybeans and low-producing lemon orchards. The expansion in this province is mostly in the hands of large producers; there are no new players.
Of the 22 mills that operated in 2007, 15 are located in Tucuman Province, which accounts for 66% of the country’s total sugar output. The five mills distributed between Jujuy and Salta accounted for 33%, and two small mills in the Northeast of Argentina produced the balance.
Most private economists predict that the exchange rate in Argentina will remain stable over the next 12 months. However, with inflation rates at about 10% annually, the exchange rate will lose competitiveness.
Argentina produced 204 million liters of ethanol in 2007. Only 17 sugar mills have produced alcohol, ranging from 255,000 liters at the smallest one, to 33 million liters at the largest. Of the total output, roughly half was exported and the other half went to the domestic market, which is scheduled by law to increase in the coming years, as fuel blend quotas are installed in the country.
Many local sugar mills are in the process of analyzing the expansion of their ethanol production capacity. One mill in Tucuman recently inaugurated a plant (focused on the export market) and another mill in Salta will expand its capacity in 2008. If conditions remain reasonably encouraging for ethanol production from sugarcane, Argentina could expand its production to 300 million liters in the next few years. The coming year will be the first year since the late 1980s (when the local gasohol program was deactivated) that cane will be crushed for alcohol production.
Most Argentinian observers see this as a growing trend as the strong world developments of biofuels provide great opportunities to the sugar industry.
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