Brazil

Area: 8.5 mln Km2

States: 28

Population: 176 mln

Life Expectation: 69 years

Unemployment: 7.3%

GDP (US$): 500 bln

Currency: Real (R$3,00=US$1,00)

Brazil Population

Country

Urban

11

2

37

11

7

351

21

34

12

4

33

12

6

33

12

6

35

12

9

34

13

3

33

13

4

34

13

8

32

14

0

33

14

1

33

20

40

60

80

100

120

140

160

180

199

1

199

2

199

3

199

4

199

5

199

6

199

7

199

8

199

9

200

0

200

1

200

2

Credit Cards

0

5

10

15

20

25

30

35

40

45

1997 1998 1999 2000 2001 2002

Number of Credit Cards (mln)

Total Expenses (US$ bln)

Income Held by the Richest 10% of the Population

20%

30%

40%

50%

60%

70%

80%19

90

199

1

199

2

199

3

199

4

199

5

199

6

199

7

199

8

199

9

Per Capita Income US$

4.993

3.584

2417

4.423

3.181

4.981

4.866

4.399

4.553

4.755

4.891

3.255

2.200

2.700

3.200

3.700

4.200

4.700

5.20019

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

Cane Producing States

Regions Productivity

Cane Production:

- 1 mlm / ton

78 tons/ha

80 tons/ha

82 tons/ha

75 tons/ha

40 tons/ha48 tons/ha

70 tons/ha

75 tons/ha 50 tons/ha67 tons/ha

65 tons/ha51 tons/ha

35 tons/ha

73 tons/ha

50 tons/ha

Cane Production Evolution

Million Tons

77 77

93102

111118 143

151

126

152

172

0

50

100

150

200

250

300

350

92/93 93/94 94/95 95/96 96/97 97/98 98/99 99/00 00/01 01/02 02/03 03/04

147 141 151 154178 185

170156

130 139 147

173

167

Estimate: 340 million tons

35%

46% 51%

SugarEthanol

Sugar Balance

CS NNE Brazil

118 696 814

18.698 3.730 22.428

7.056 1.785 8.84111.350 2.150 13.500

200 (200) 0210 691 901

18.700 3.620 22.320

7.120 1.800 8.92011.000 2.000 13.000

350 (350) 0440 861 1.301

0% (3%) 0%1% 1% 1%

(3%) (7%) (4%)75% 75% -

Exports

Transference (CS - NNE)

Production

Consumption

Stocks Forecast 30 April, 2002

Stocks Forecast 30 April, 2003

Exports

Transference (CS - NNE)

Production

Consumption

2002/03 Crop

2003/04Crop

Transference (CS - NNE)

Exports

% Variation 2003/04 Vs 2002/03

Production

Consumption

Stocks Forecast 30 April, 2004

Export Parity

5,00

9,00

13,00

17,00

21,00

25,00

29,00

33,00

37,00

41,00

45,00fe

v/0

0

ab

r/0

0

jun

/00

ag

o/0

0

ou

t/0

0

de

z/0

0

fev/

01

ab

r/0

1

jun

/01

ag

o/0

1

ou

t/0

1

de

z/0

1

fev/

02

ab

r/0

2

jun

/02

ag

o/0

2

ou

t/0

2

de

z/0

2

fev/

03

R$

/50

kg

Eq

uiv

ale

nt

(ex

-mil

l)

VHP Export

No5 export

ESALQ

Anhydrous

Brazilian Exports per Port in 2002/03 Crop (000 tons)

525

Others

76

1.467

202

288.1322.463

69165

Soil Varieties

Types of Soil:

Productivity t/ha

A1 >100A2 96-100 B1 92-96 B2 88-92 C1 84-88 C2 80-84 D1 76-80 D2 72-76 E1 68-72 E2 < 68

C / D

A2 / B / CC / D

C / D / E

Rainfall Pattern

B

A

B

C

A

D

DE

Rainfall:

A - 1000 - 1300 mm

B - 1300 - 1600 mm

C - 1600 - 1900 mm

D - 1900 - 2200 mm

E - 2200 - 2500 mm

Brazilian Exports per Sugar Type

mln tons mttq

0

2

4

6

8

10

12

14

2000/01 2001/02 2002/03

Raw VHP

Crystal Refinned

EU

Other Sugar Cane Products

Energy Co-generation;

Yeast for animal food;

Molasses for yeast production and for export;

Vinasse for irrigation and fertilisation;

Filter waste for fertilisation;

Carbon Credit Sales.

Environmental Issues

Cane Burning During the Harvest: Sao Paulo State approved a law to abolish the cane burning until 2031, according to the table below.

Mechanisable AreaNon-Mechanisable

Area2002 80% 100%2006 70% 100%2011 50% 90%2016 20% 80%2021 0% 70%2026 0% 50%2031 0% 0%

Parcel of the Area Allowed to Burn

Environmental (Carbon Credit, Childhood labour and Bio Diesel)

Around 20 mills are implementing carbon credits

.. programmes.

A mill that produces 100 mln litres of alcohol can have an

. extra income of around US$ 1.1 mln with carbon credits.

Biodiesel blend of 5% on the conventional diesel is under

.. National Petroleum Agency analysis.

61 mills in Brazil are enrolled in childhood labour combat

.. programme.

Weaknesses and Strengths

Industry Diversity

Political Environment

Currency

Other High potential for area expansion.

Lower production costs.

The devaluated currency increases Brazilian .. ....competitiveness in the world market.

Strong lobby with the Government.

The generation of US Dollar income increases .. the industry political power.

Strengths Brazilian industry is less exposed to the ....international sugar prices than others. Other sugar cane products helps to reduce the ....dependence of sugar and alcohol.

Weaknesses and Strengths

Logistics

Political Environment

Marketing

Features Lack of an overseas marketing programme.

Competition with soya at the port terminals in the CS.

Long vessel lines during season causes shipment delays.

Poor industry co-ordination.

Poor rail system.

Long distances between CS mills and ports increases ...freight cost.

Weaknesses

Weaknesses and Strengths

Logistics

Political Environment

Marketing

Features

Weaknesses

Can be addressed via Additional Investment though ....raises total cost - especially to produce No.11 ....deliverable sugar

Industry needs to become aligned

Requires change of approach

Limited knowledge of Overseas Markets

Customers are a handful of International Trade Houses

Sales dependent upon Sugar Trade requirement and ...not end user driven / limited direct relationships

Exposed to ‘Trade Squeeze’

F.O.B. sales to the Trade results in loss of control and ...higher logistics costs and potential port delays

Lack of knowledge of end user requirements exposes ...Brazilian industry to adverse changes in market place

Brazilian industry adopts a speculative approach to sales, ...which is not end user focused and creates volatility

Marketing Features

Conclusion

Brazil will continue to grow

Will continue to be the lowest cost producer

Will continue to diversify in products and industry complexity

Ethanol reassumes strategic importance in the longer term

Conclusion

Queensland must aim to be the second most competitive .. .

..Producer, driving down domestic cost of production:

Maintain and develop excellent relationship with customers

Continue to be the preferred origin to the majority of

first . ...class global raw sugar buyers

Make every effort to jealously guard the

geographical . . ...advantage Australia has in the Far East

marketplace

How to meet this challenge?