Brazil | Sugar high

Robert Habib ’13 | Brazil

As I discovered in my Security Analysis class, agriculture’s future won’t look anything like its past. Growing populations, shifts in their diets coupled with shrinking arable land and water shortages are coming together in a maelstrom of dislocations. Our investment thesis centred on Cosan, the leading Brazilian ethanol producer.

Today we visited a large producer of sugar and ethanol a few hours outside São Paulo. Brazil is abundant with sugar cane, which through harvesting, crushing, decanting, treating and distilling become sugar, hydrous ethanol (ethanol fuel for cars) and anhydrous ethanol (component of gasoline).

A few factors of change:

1) Mechanisation: the plantation was heavily mechanised with the US latest tractors, complete with auto pilot and computer programmed fertilisers dispensers. Largely the result of reforms, the government has put money to work in retraining seasonal workers being displaced.

2) Brazil has barely enough supply to meet its domestic demand, let alone any increase in US demand. Plantations like the one we visited have already undertaken a multitude of efficiency improvements to reduce waste and increase crop yield.

3) Anyone who gets hold of cane harvesters that don’t compress soil will see huge yield increases as canes would harvest infinitely without needing to be replanted every few years.

Overall we were very impressed with the technology we saw today of Brazil’s ethanol industry.

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