Professor warns of indebtedness in the sugar and alcohol sector

According to Gil, the essence of commodities is their cyclical nature, and resilience should be the main strategy for sector agents. Leverage, however, remains a weak point. In a simulation by the professor, a hypothetical mill with a debt of R$ 450 per ton of cane, a cost of R$ 225 per ton, and a production mix of 60% sugar and 40% ethanol would end the 2024/25 crop in the red, even with reference prices of R$ 2,400 per ton of sugar and R$ 3,000 per cubic meter of ethanol. For the 2025/26 crop, Gil projected even lower base prices, of R$ 2,000 per ton and R$ 2,800 per cubic meter, considering price variations and the correlation between the two products. The Monte Carlo simulation indicated only a 1.25% probability of profit for this highly leveraged mill. By reducing the debt to R$ 190 per ton of cane, the chance of ending the cycle in the black rises to 84%, even in an environment of low ...