Peru: Sugarcane Production Rising
16 April 2007 Cane sugar production for 2007 is forecast to reach 885,000 metric tons (MT) following a down year in 2006 with 760,000 MT. Improved weather conditions and investments in new plantations and processing plants are driving the increase, which is expected to continue, reaching 935,000 MT in 2008.
Peru’s government passed Law 28054 in 2003, which promotes the use of biofuels. Implementing regulations are still pending (which means that the law it is not in effect yet), as there are tax issues that remain unresolved, such as whether or not ethanol would be subject to excise taxes.
Sugar cane production is forecast at 7.7 million MT in 2007, an increase of 5.8% compared to 2006. Sugar mills in Peru are located along the coast and have a total milling capacity of 37,000 MT of cane per day. Yields range from 53 to 190 MT of cane per hectare (Ha) and age from 13 to 18 months between cuts.
The Peruvian northern coast has good conditions for growing sugarcane, and all the fields in this area are surface irrigated, which allows producers to cut the supply of water at a given time to obtain higher sucrose yields of around 12%. Investments in the area are substantial. Land is being purchased by Peruvian and foreign investors, and the efficiency brought by economies of scale is improving return rates, which attracts more investment.
Casa Grande, Peru’s largest sugar producer, was acquired in 2006 by Gloria, Peru’s largest dairy processor. Gloria plans to invest US $60 million to improve the company’s efficiency. Casa Grande has 30,000 Ha but only about 12,000 Ha under production, and its milling capacity (10,000 MT of cane per day, a third of total capacity in Peru) operates at less than 50%. Casa Grande could at least double its sugar production very rapidly by planting the areas currently idle and improving yields through technological changes.
Cartavio, Peru’s second largest sugar producer, has invested US $58 million in the past seven years to improve its production, yields, and processing. However, there are some mills, such as Pomalca and Tuman, that are floundering because they refuse to merge with strategic partners.
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