The sugar-energy sector is certainly experiencing a very rich moment. While there is no shortage of uncertainties, avenues of extremely interesting and promising opportunities are opening up.

Being a country with a vast territory, largely tropical, with plenty of water and light, combined with technology, allows the sector to develop a series of alternatives in the energy field, competitive and well aligned with the decarbonization scenario that the world will undergo in the next 30 years.

Uncertainties include the competitiveness of sugarcane ethanol in relation to gasoline, in a clearly populist government concerned only with its performance in the next presidential elections in 2026, which completely abandoned the international price parity and started to adopt a very non-transparent policy. We are already feeling the first effects of this, which are making autonomous distilleries, which do not have sugar in their product mix , completely unfeasible and operating in the red.

Given the current situation of ethanol prices, due to the non-maintenance of readjustment criteria by Petrobras, we are predicting that already at the end of the year, in those companies where the level of financial leverage is high, there will be a situation of insolvency due to the current price level observed in the market to be well below production costs. In addition, competition with corn ethanol is currently much more competitive, a situation that is likely to continue in view of the extraordinary harvests of this cereal that are to come.

Thank God, Brazil is very competitive in the production of sugar, a commodity whose consumption should grow by around 2 million tons per year, thanks to the expansion of the market in Africa and Asia, giving Brazil all the conditions to maintain its current high share in world trade between 45 and 50%.

Speaking of new prospects, we'll address them below in descending order of maturity.

1. Efficiency in the energy balance of the unit to provide a good residue of bagasse. We have witnessed the appreciation of biomass in general, due to its use in the most diverse industries, as an energy generator, use in the orange juice industry, in grain drying, in the corn ethanol industry, in the production of second generation ethanol, in electricity generation, today the worst use. If there are no long-term contracts with satisfactory prices, and due to the use of eucalyptus in the growing pulp industry, investments that provide bagasse savings are very welcome.

2. Investment that causes an increase in the sugar mix is very present in the industry today, whether in setting up new factories or optimizing the existing sugar unit. All this to increase the crystallization capacity and increase the mix. sugar bowl once the goods are less affected by government intervention in Brazil and have strong world trade.

3. We have witnessed a growing interest from companies to study the implementation of biogas and biomethane production units , using filter cake and vinasse. The projects have shown increasing yield rates, pointing to a growth in the rate of return given the perspectives of using biogas and biomethane in different segments, from energy production, currently the lowest return, to market sales to different segments.

industrial plants, plus the promising replacement of diesel in the internal fleet of vehicles at the plants. This tends to significantly improve the carbon footprint of companies, in addition to waste proving to be excellent biofertilizers, despite the loss of organic matter. This is very much in line with the appreciation given today to the circular economy.

4. The implementation of a corn ethanol production unit attached to the sugarcane crushing unit has also been the subject of many studies, mainly in the Midwest, closer to the region where second-crop corn is most produced in Brazil.

Due to the synergy between the two mills, mainly regarding the issue of sugarcane biomass, a source of steam and energy, and with perspectives of abundant harvests in the coming years, this alternative has been studied with great care, despite the pessimism with the behavior of prices of ethanol in the short term. Corn ethanol has proven to be very competitive with sugarcane ethanol and all growth, at least in the short term, in ethanol production will come from corn.

5. Second generation ethanol. We have seen a large group in the sector place heavy bets on this alternative, but we believe that for the poor mortals this option is still a little far off, given the high investment costs vis-à-vis the production volumes achieved, as well as some uncertainties in in relation to the technological route adopted.

All this leads to a high production cost, creating a great dependence on obtaining long-term contracts at much more remunerative prices in relation to the conventional product, which is also not available to almost the entire sector, but we are very confident in the future long-term use of this product.

Another thing that puts a lot of hope for the future of ethanol is the question of its use in the production of Sustainable Aviation Fuel, given the commitments of airline companies to reduce their emission levels. Given the volumes of Sustainable Aviation fuels that will be required, we expect a share of sugarcane ethanol that could involve very significant volumes.

But, fundamentally, even recognizing the many evolutions in agricultural practices achieved by the mills in recent years with significant improvements in the quality of agricultural operations, varietal management, an intensive and growing use of technology, a significant increase in the use of bioinputs, we are anxiously awaiting events of great impact that can significantly change the way sugarcane is produced, such as seed cane that will bring many benefits to companies in the sector.

Anyway, there are many challenges and each time at infinitely greater levels of complexity, which makes sugar-energy more and more interesting.