Bunge to invest $2.5bn in Brazilian cane

Bunge, the US-based agricultural group, plans to invest $2.5bn in Brazil to boost its sugar and biofuels business as it battles for control of one of the world’s hottest alternative energy markets.

Agribusinesses, as well as global oil majors such as Royal Dutch Shell and BP, have flocked to Brazil’s cane fields over the past year to take advantage of soaring sugar prices and the ever growing demand for ethanol.

Bunge will invest $2.5bn by the end of 2016 in eight of its existing mills in the Latin American country, increasing the company’s crushing capacity by 50 per cent to 30m tonnes of cane a year, according to a statement late on Thursday.

Last month, the group announced that profits at its Brazilian sugar and ethanol business more than quadrupled in the second quarter to $18m from $4m in the previous year.

Bunge’s investment plan comes only a day after Brazil’s state-run oil giant, Petrobras, announced it would spend R$520.7m ($328m) jointly with local group São Martinho to create the world’s largest factory for sugar-cane ethanol.

Ethanol has long been popular in Brazil, where about 90 per cent of all new cars are built with “flex-fuel” engines that can run on petrol or ethanol or any mixture of the two.

However, the industry’s largely debt-ridden and family-run mills have failed to keep up with growing demand from Brazil’s middle classes, boosting ethanol prices worldwide.

Moves by the US to open its market to Brazilian imports and growing demand from Europe have also attracted the attention of global companies.

Brazil is the second-largest producer of ethanol behind the US but it is a more efficient one as it generates the biofuel from sugar rather than corn.

Earlier this year, Raízen, Shell’s new joint venture in Brazil, announced plans to invest $7bn over the next five years to more than double its annual production of ethanol from 2.2bn to 5bn litres.