Sugar Cane is a perennial grass that is native to the tropical Asian regions. It has rather fleshy, fibrous, jointed stalks that are abundantly rich in sugar, and it grows to measure between two and six meters tall. It is a member of the grass family, which also includes wheat, maize, and rice. Sucrose is the basic product of Sugar Cane that gathers in its stalk internodes. Cultivating Sugar Cane requires a temperate climate that has just the right level of moisture. Therefore Sugar Cane is grown in prime growing regions such as in Pakistan, India, Brazil, Peru, Colombia, Bolivia, Ecuador, Australia, the Philippines, Cuba, Hawaii, South Africa and also in El Salvador. Although Sugar Cane produces seeds, growers prefer the modern stem cutting technology as the best common reproduction method. The cutting must at least contain one bud, and hand planting these cuttings in some instances is highly encouraged. In the more highly advanced countries such as the US and Australia, billet planting is utilized. The inhabitants of New Guinea were believed to be the earliest to adopt Sugar Cane at about 8,000 BC, although the recorded history of solid sugar is in India at AD 500. After it was adopted, the cultivation then spread further and finally reached in to southern China, India and Indochina. The conquerors along with Muslim traders exported the Sugar Cane plant together with the refining technologies to European countries and Middle Eastern countries.
The cultivation of Sugar Cane and its processing then extended further and finally reached Persia by the sixth century AD; Sugar Cane was then later carried to the Mediterranean through the Arab expansion. n more ancient civilizations, the people used to chew on the Sugar Cane in order to extract the plant’s addicting sweetness. The Indians discovered the process to crystallize sugar at about 350 AD. Initially, original Sugar Cane came from the tropical South and Southeast Asia. However, there are different types of Sugar Cane and most of these newer and diverse species most likely came from different locations such as India and New Guinea. The early methods of Sugar Cane refining was done by pounding and grinding the cane to be able to extract the juice. The juice would then be boiled afterwards, or dried under the sun in order to yield a more sugary solid.
Cane sugar production for CY 2009 is forecast at 1.05 MMT, from one million metric tons CY 2008. Good weather conditions, strong investment in new plantations, and more efficient processing plants will drive this increase. Post believes that sugar production in Peru will continue increasing in the upcoming years, reaching a surplus by 2011. Sugar cane production is forecast at 9.72 MMT in CY 2009. Sugar mills in Peru are located along the coast and have a total milling capacity of 37,000 MT of cane per day. Since sugar cane in Peru is produced year round, mills do not need to be very large. Yields and cane age vary greatly from one producer to another. Yields range from 53 to 190 MT of cane per hectare and age varies from 13 to 18 months between cuts. Production costs also vary considerably, with fuel being one of the most important. Fuel utilization ranges from 5 to 90 gallons per metric ton of sugar produced.
The Peruvian northern coast has excellent conditions for growing sugar cane due to high temperatures and lack of rain. All cultivation is surface irrigated, allowing producers to cut the supply of water at a given time to obtain higher sucrose yields. Under normal weather conditions, and provided the cane is milled on time, sucrose yields are around 12 percent. Despite the ongoing economic crisis, the Peruvian northern coast, where almost the entire sugar crop is produced, continues undergoing a radical change driven by a private investment “fever”. Land is being purchased by Peruvian and foreign investors, followed by the consolidation of property. The efficiency brought by economies of scale is improving return rates, which attracts more investment, generating a beneficial cycle. It is quite common to see bulldozers flattening sand dunes to plant more sugar in the desert. This process is finally undoing the damage done by the catastrophic 1968 land reform that expropriated land to give to workers in socialist type cooperatives. Gloria, Peru’s largest dairy processor, acquired Casa Grande in 2006, and is implementing a $60 million investment plan to upgrade the mill and renew plantations. Gloria also owns Cartavio, the second largest sugar company. Casa Grande has access to 30,000 hectares, but only about 12,000 hectares are under production. Similarly, its milling capacity (10,000 MT of cane per day, a third of Peru’s total capacity) operates at less than 50 percent. Casa Grande could at least double its sugar production very rapidly by both planting currently idle lands and improving yields through technological changes.
Ethanol production is also an important project that investors are evaluating. Cartavio, Peru’s second largest sugar producer, has invested $70 million in the past eight years to improve its production, yields, and processing efficiency. However, there still are some mills, such as Pomalca and Tuman, which refuse to merge with a strategic partner and continue to languish in a financial black hole. Political parties have a strong influence on these companies’ workers and are often a source of political unrest. The leadership of these companies, who have been in office for over three decades, have made a good living off the status quo and are the least interested in finding a strategic partner. In an effort to encourage investment in these companies, the GOP is auctioning its shares to interested private sector companies. Government acquired shares were the result of a conversion of unpaid taxes. Ethanol production from sugar cane is one of the main reasons Peru is seeing increased investment in the sugar industry. In 2003, the GOP passed Law 28054, which promotes the use of environmentally friendly “biofuel”. This law encourages the substitution of highly contaminating components for more environmentally friendly elements. The estimated investment for ethanol production is roughly $130 million, about 40 percent for adjusting mills and 60 percent to increase area planted. A 100,000-liter per day ethanol plant costs around $6-8 million.
The industry estimates that around 7.8 percent of the gasoline and 5 percent of diesel could be replaced by ethanol. However, there are tax issues that remain unresolved, such as whether ethanol would be subject to the excise tax or not. When the domestic law is finalized, investors are aiming at the United States as their primary market. Under the U.S. - Peru Trade Promotion Agreement, ethanol from Peru is granted duty free access. A Peruvian and a U.S. company have already bought 10,000 hectares each to begin sugar cane plantations to supply the ethanol market. Cane sugar consumption is forecast at 1.18 MMT in CY 2009, around 70 percent of which is for direct consumption and the remaining for industrial use. As the Peruvian economy improves, sugar demand will increase, especially for sugar based beverages and confectionary products.