In Brazil, the Brazilian government announced a program giving $38 billion in subsidized credit to the ethanol sector. The program is expected to increase sugar production and milling industries while ultimately doubling the annual turnover of the ethanol industry. In light of Brazil’s $48 billion dollar sugar and ethanol industry, the program is also expected to increase exports into the world market.
Piper Jaffray analysts Michael Cox and Mike Ritzenthaler write: “Incremental positive for BG & AMRS, negative for GPRE & ANDE. We believe the Brazilian subsidy program should be a positive for Bunge, which has struggled to live up to expectations within its Brazilian sugarcane business. Bunge replanted ~27% of its acreage (& contracted acreage) this season in an effort to bolster feedstock output, and has announced intentions to do the same next season.
“For Amyris and other Brazil-focused bioindustrials, the expanded planting may reduce feedstock costs, though with limited end markets and commercial traction, the benefit of cheaper sugar may not make a meaningful difference for the stocks. For U.S. ethanol producers, like GPRE and ANDE, the negative implication is ~18-24 months away.”