Experts say that Brazil is on track to increase ethanol production in 2026.

Analysts and commodities traders stated on Tuesday that a healthy ethanol price, the expansion of corn-ethanol plants, and a large sugarcane harvest are all factors contributing to the increase in biofuel production in Brazil this year, the world's?second largest producer. They said?during an event at the Dubai Sugar Conference, that increased production this year is due to a combination of Brazilian sugarcane processing switching to more ethanol instead of sugar and the additions to corn processing plants.

The raw sugar contract in New York is at a five-year minimum.

Guilherme Nastari is a director of sugar consultancy Datagro. He said that mills have a clear incentive to make more ethanol in the new season.

He said that current ethanol prices are trading at a large premium over New York sugar. Anhydrous ethanol is currently at 19.73 cents per pound, and hydrous ethanol is at 17.96 cents/lb. ICE raw sugar was closed at 14.63 cents/lb on Tuesday. Around March, the new Brazilian sugarcane crop begins. "The initial price parity (sugar/ethanol), is heavily in favor of ethanol," Jeremy Austin said, general director of Sucden Brazil. CovrigAnalytics, a sugar and ethanol consulting firm, believes that mills will concentrate on ethanol at least until the middle of June. BP Bioenergy (the Brazilian sugar and ethanol subsidiary of BP Plc) will adjust its production mix based on prices as the year goes by, according to Ricardo 'Carvalho the commercial director for the division. Rabobank predicts that more than 3 billion additional liters corn ethanol will be available in 2026.

StoneX, a broker based in the United States, estimates that Brazil's combined corn and cane ethanol production will grow 7.9% to 36.5 billions liters by 2026/2027. Cane ethanol is expected to increase 4.4% while corn ethanol will rise?17%. Carvalho believes that the extra ethanol production could be too much for Brazil's local market.

CovrigAnalytics has noted that it may lead to an increase in exports. (Reporting from Sarah El Safty, Dubai; Additional reporting provided by Roberto Samora, Sao Paulo; Writing by Marcelo Téixeira in New York and Editing by Paul Simao.

(source: Reuters)