From machete to machine in Brazil’s cane fields

* Cane industry mechanizes rapidly in Brazil

* Shift is driven by profits, environmental regulations

* Equipment suppliers see boom in demand

By James Matthews

PIRACICABA, Brazil, Aug 20 (BestGrowthStock) – For nearly five
centuries, the classic image of sugar production in Brazil has
been one of workers setting cane fields on fire and then
descending on the crop with their machetes for harvest.

No longer.

More than half of the cane in Brazil’s main sugar-producing
area of Sao Paulo state was harvested using machines during the
2009/10 season, a historic first that portends greater
efficiency in coming years. The shift is occurring so quickly
that some producers face a four-month waiting list to get the
right equipment.

The transition, driven by both increased competition and
tougher Brazilian environmental laws, has been a boon for
multinational equipment manufacturers supplying the world’s
leading producer of sugar and the second largest ethanol
producer after the United States.

“Brazil’s market is hot,” said Jose Emilio dos Santos,
manager of Tratorag Comercio e Representacao, a John Deere
(DE.N: ) dealer based in Piracicaba, the heart of the
center-south’s cane growing region in Sao Paulo state. “Many
producers are looking to buy a new machine harvester.”
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Graphic on sugar cane output http://link.reuters.com/wug69j

Graphic on burning fields http://link.reuters.com/bac26n
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Last year, Cosan (CSAN3.SA: ), the world’s largest sugar and
ethanol producer, spent 30.5 million reais ($17.3 million) on
mechanization and expects to train between 180 and 200
harvester operators per year for the next four years, said Luis
Carlos Veguin, the company’s human resources director.

Adoption of the technology by big firms has forced many
smaller producers to follow suit. In the first six months of
2010, 3,186 harvesters of all types were sold in Brazil, up
from 478 in the same period of 2006, according to figures from
Anfavea, the vehicle manufacturer’s association.

It’s not just companies that are benefiting from the
switch. Izaura Freitas Souza, 39, has wielded a machete in the
sugar cane harvest since she was a 15 year old and once almost
sliced off her big toe in the fields.

Today, Souza drives a harvester for Cosan in Piracicaba and
says she has tripled her earnings to 1,800 reais a month, which
allows her to save to buy a house. “It is clean work now,” she
said, “without the physical wear and tear.”

THE COST OF MECHANIZATION

Initial investment in a harvester is expensive but over
time is a cheaper alternative to manual labor because wages
have been rising in tandem with Brazil’s economy, Veguin said.

A new cane harvester from John Deere costs an average
880,000 reais, said dos Santos, the tractor dealer. The
company’s main competitor in Brazil is Case IH, a subsidiary of
CNH Global (CNH.N: ).

For smaller sugar cane producers who are unable to afford
the initial investment, the situation can be dire. Unable to
compete with the efficiency of the bigger players, some have
been forced to enter into partnerships with Cosan or Bunge
(BG.N: ), or logistics companies, like Julio Simoes.

“Banks request guarantees and the cost of a harvester is
quite high,” dos Santos said. “Not all producers can provide
sufficient collateral.”

Mechanization is given urgency by environmental laws, which
will effectively phase out manual cane cutting in Sao Paulo
state by 2017.

Before manual harvesting begins, workers set fields alight
to clear the undergrowth and flush out snakes and insects.

Reducing burning is a priority for producers because the
method is a blot on otherwise impressive environmental
credentials — Brazilian ethanol from cane is about six times
more energy efficient than its U.S. corn-derived counterpart —
and they have introduced more stringent schedules.

“We have a 100 percent target for the elimination of
burning (in areas suitable for mechanization in Sao Paulo
state) for 2014,” said Antonio de Padua Rodrigues, a director
at Unica, the cane industry association.

EMPTY CANE FIELDS

Cane producers fear that environmental reasons might be
used as de facto trade barriers to prevent the entry of
Brazilian sugar and ethanol into less competitive domestic
markets in Europe and North America.

This will be important as Brazil seeks to expand in
overseas markets. The country’s 2010/11 sugar cane crop will be
the ninth record in a row, up 10 percent from the prior year,
according to the government’s supply agency, Conab.

But the worst hit by mechanization are the cane cutters,
many of whom risk losing their jobs if they can’t retrain.

A harvester replaces about 100 cane cutters a day,
according to Unica, and creates 30 jobs by way of operators and
maintenance teams. An operator trainee must be literate and
hold a driving license, which excludes many cutters.

Although government and producers have stressed retraining,
figures from Unica show there were 140,000 manual cane cutters
in Sao Paulo state in 2010, down from 190,000 in 2006.

Even Souza, the harvester operator, misses the company in
the fields. “During the breaks everyone would joke around,” she
said. “In the harvester I can only laugh at the memories.”
(Editing by Brian Winter and Kieran Murray)
(1$=1.764 reais)

From machete to machine in Brazil’s cane fields