High energy prices fuel investor interest in Brazil's idle biofuel capacity & More News Here

* High ethanol prices increase investor interest for crops in Brazil

* U.S. fund sees cheap, unused capacity obtainable

* Around 40 crops are being supplied as optimistic second spurs M&A

By Marcelo Teixeira

NEW YORK, June 8 (Reuters) – High ethanol and sugar prices have traders trying into merger offers in Brazil, the place lots of idle biofuel capacity could possibly be put to work to assist increase tight world fuel and meals provides.

“Brazil is the Saudi Arabia of sugarcane, there is inexpensive unused capacity. That is the investor dream,” stated Craig Tashjian, managing accomplice at U.S. funding fund Amerra, which has been increasing into Brazil’s sugarcane and corn-ethanol sector.

“I’m very positive about the investment opportunity there.”

Amerra holds stakes in six Brazilian corporations together with the nation’s largest corn ethanol producer FS Bionergia. It has a 36% stake at holding firm Tapajos, which owns 23.7% of FS.

Brazil is the world’s largest sugar producer and second largest in ethanol, however almost 30% of its sugarcane crushing capacity is idle due to monetary difficulties confronted by smaller corporations. Investors and bankers stated quite a few offers are being negotiated, with massive corporations hoping to snap up struggling smaller gamers which might be working beneath capacity.

Henrique Penna, chief industrial officer at sugar & ethanol firm Jalles Machado SA, which went public final 12 months and made its first acquisition in May, stated round 40 crops are being supplied on the market.

“In the final stage of the (acquisition) process, we identified at least eight good targets,” he stated, including that present prices for sugar and ethanol have drawn sellers and consumers to the market.

Sugar prices are buying and selling close to a five-year peak, whereas ethanol prices in Brazil are close to all-time highs.

Penna stated Jalles isn’t on the lookout for one other mill for now, however stated one of many crops they appeared into, IACO Agricola, managed by banker Andre Esteves and by the Grendene group, is being supplied in the market by BTG Pactual.

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Asked in regards to the mandate, BTG Pactual declined to remark.

The final two years have improved corporations’ monetary state of affairs after years of underperforming, attributable to greater prices, stated Andre Cury, head of business banking for Citi in Brazil.

“EBITDA numbers rose a lot and they managed to cut debt. The companies are in a better shape now,” he stated.

Overall, there may be spare cane crushing capacity in Brazil as a result of decrease sugar and ethanol prices in the earlier decade decreased the sugarcane space as farmers switched to extra worthwhile crops reminiscent of soybeans and corn.

Brazil center-south mills have capacity to crush round 840 million tonnes of sugarcane per 12 months, based on business group Unica, however this 12 months’s crop is projected at solely round 540 million tonnes.

The mill Jalles Machado purchased, for instance, has a crushing capacity of two.7 million tonnes, however is presently solely crushing 2 million tonnes, Penna stated.

There is room now for the sugarcane crop to develop in coming years attributable to sizzling demand for ethanol, stated Pedro Fernandes, agribusiness director for funding financial institution Itau BBA. He believes the crop migration from cane to grains has ended.

“Current prices make sugarcane very profitable, both for farmers and for processors,” he stated, projecting that Brazil’s sugarcane planted space might develop in 2023, 2024 and 2025. (Reporting by Marcelo Teixeira; Editing by David Gregorio)

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