How about this for a lede graf: «As Brazil’s sugarcane sector consolidates and traditional family-owned sugarcane groups face extinction, fuel- and industrial-grade ethanol producers and processors diversify products though biochemistry».
This is a sector I have not regularly followed for a year or two, so caveat lector.
First, sugarcane miller and federal legislator João Lyra of Alagoas is pressured by creditors and is working to avoid the bankruptcy of his group — reported by Tatiana BAUTZER of ISTOÉ Dinheiro.
Second, several major sugarcane processors build capacity to diversify their by-products.
At 82, the richest sugarmill owner and federal legislator ( PSD-AL) faces a legal tempest in a bid to retain control of his sugar and alcohol business. In late September, a state court declared the bankruptcy of Laginha Agro Industrial, which controls five processing plants — three in Alagoas and two in Minas Gerais. The group had been in reorganization since 2009 and has debts of R$1.2 billion. A batallion of lawyers, however, managed to overturn the ruling, alleging bias on the part of judge Marcelo Tadeu, who transformed the reorganization into a bankruptcy.
President of the state high court of Alagoas Sebastião Costa Filho accepted this argument and suspended the bankruptcy proceeding. The bankruptcy came at the request of a group of banks led by the French Calyon and Natixis and by the Banco do Nordeste. These institutions argued that Lyra failed to pay the sums set forth in the reorganization contract and were preparing to assume control of the processing plants as soon as full bankruptcy was declared. On of the lawyers for the banks,José Areias Bulhões, says that the suspension of the proceedings was an “absurd” decision by an interim judge who had previously favored the Lyra group.
The banks will appeal the decision and are considering taking the case to the CNJ, the National Justice Council. The bankruptcy application came as Laginha stopped payment to the banks as it attempted to renegociate terms, alleging that interest and sugar and alcohol prices have fallen in recent years.
A controversial figure, Lyra, the father of Thereza Collor and father-in-law of ex-president Fernando Collor de Mello, has been accused of using slave labor in his companies, and is far from being able to recover the Golden Age of the Republic of Alagoas. “Laginha Agro Industrial will overcome this latest challenge and will continue contributing to job creation and development in Minas and Alagoas,” Lyra said in an official statement.
Sugar producers seek to diversify using biotechnology
A partnership between Bunge and U.S. biotech company Solazyme will begin producing sugar-based oils in late 2013.
Bunge: New unit will be ready later this year and will be built in partnership with Amyris of Emeryville, Califórnia
São Paulo — Brazilian sugarcane producers from Bunge to São Martinho are proposing the construction of factories that would convert their harvests into chemicals to be used in a variety of products, ranging from face cremes to industrial lubricants.
A partnership between Bunge and U.S. biotech concern Solazyme Inc. will commence production of cane-based oils in late 2013. Cane producer Paraíso Bioenergia SA will open the first plant to produce these raw materials, which will include a substitute for shark liver oil in facial cremes. The plant will be built in partnership with Amyris Inc. of Emeryville, Califórnia. São Martinho and ETH Bioenergia SA are planning similar installations in the next two years.
Although the use of vegetable products in the manufacturing of renewable chemicals is viewed with skepticism by some global investors, the iniciative has become attractive to Brazilians since sugar prices fell 13% over the last year and ethanol fell 12%.
Amyris fell 74% this year, after delaying construction of a factory in partnership with São Martinho and facing concerns that it will not achieve the scale necessary to operate profitably. Solazyme fell 12% this year.
I am assuming the percentages cited represent revenues.
“This is an incredible opportunity for sugarcane producers, so long as the technology works properly,”said Steven Slome of Nexant Inc., in a telephone interview. The companies “could double the revenues extracted from the same amount of raw material.”
In a related story, Cosan announced in June that it will partner with Braskem to produce bioplastic resins.
Cosan … announced a contract under which it will supply 175 million liters of ethanol hydrate — ethanol-based polyethylene — to Braskem’spetrochemical facility currently under construction in Triunfo (RS).
According to a June 22 press release, the contract is for five years and the price will be set based using the Esalq indicator.
Agro indicators set by a center for agrobusiness studies at USP.
The release did not report the value of the deal, but the Estado de S. Paulo reported that Cosan should earn R$ 1 billion over the life of the contract.
Jornal Cana recently noted a tendency for pure trading companies to enter the market as producers.
In search of more robust margins, tradings that once operated as pure sugar speculators have in recent years begun to evolve into important players in the area of production. Six of the 9 principal house that trade sugarcane are — or are becoming — producers. Ten years ago, this was true of only two or three companies. Estimates are that during the 2012/13 harvest the “trader-miller” will process some 18 million tons of sugar, about 70% of national production for the season.
A parallel tendency is the substitution of family owners by venture cap types looking to professionalize management — a subject I still would likie a chance to write up someday.