Bunge Boosts Ethanol Ratio at Brazil Mills as Sugar Declines

Bunge Ltd. (BG), which accounts for about 10 percent of global sugar trading, said its cane mills in Brazil are “maximizing” production of ethanol as the price of the gasoline additive rises.

Ethanol currently accounts for close to 65 percent of the mix at its eight mills on average,Alberto Weisser, chairman and chief executive officer of White Plains, New York-based Bunge, said today in a telephone interview. That’s an increase since February, when the ratio was 59percent ethanol and 41 percent sugar.

Ethanol prices are rising as Brazil recently boosted gasoline prices, announced lower taxes on ethanol and increased the blend rate to 25 percent starting in May from 20 percent now. The weekly spot price of ethanol that is blended with gasoline in Brazil gained 25 percent in the six months through April 19 while the most-active raw sugar futures traded in New York dropped 12 percent.

Bunge, which bought its first sugar mills in Brazil in 2007, struggled to run its mills at their full capacity of 21 million metric tons last year because of lower cane-sugar yields and ethanol prices.

Bunge’s sugar and bio-energy segment, which made up 7.6 percent of sales last year, reported a $23 million profit before interest and taxes in the first quarter compared with a $33 million loss a year earlier, the company said today in a statement. The segment helped Bunge report first-quarter earnings of $1.15 a share, topping the 91-cent average of 10 analysts’ estimates compiled by Bloomberg.

Production Ratio

Industrywide, mills in Brazil’s Center-South region, the biggest cane producer, got 53 percent of sales from sugar and 44 percent from ethanol during the 2012-2013 crop year, Antonio de Padua Rodrigues, director of trade group Unica, said today.

If sugar availability is lower later in the year as the industry shifts production toward ethanol, Bunge will “balance in a way that maximizes profit” and meets client commitments, Weisser said.

Bunge has a “single-minded focus” on reducing per-unit costs in the sugar and bio-energy segment by continuing to plant more cane, increasing co-generation, choosing farmers and leasing land closer to mills and boosting yield per hectare, Weisser said. Bunge has been planting cane for the last several years, with 70,000 hectares sown last year and about 60,000 hectares planned this year, Weisser said.

Bunge rose 6.8 percent to $72.97 in New York. The shares are little changed this year.

Weisser will step down June 1 as CEO and be replaced by Soren Schroder, the head of Bunge’s North American unit, the company said Feb. 7.

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