Sao Paulo/Tokyo, Sept 24 - The Brazilian unit of top grain processor Bunge Ltd and Japanese trading house Itochu Corp said on Tuesday they will invest about $800 million in two ethanol and sugar joint ventures in Brazil.
Itochu is catching up with local rival Sojitz Corp in Brazil's fast-growing green fuel sector and is challenging leaders in the global grains market like Mitsui & Co with two deals this summer to capitalise on Chinese food market.
Itochu, Japan's forth biggest trading house, will acquire a 20 percent stake in Santa Juliana mill, which was bought by Bunge in 2007 at Minas Gerais state.
The mill's crushing capacity, currently at 1.6 million tonnes of cane per year, will be expanded to 4.2 million tonnes when fully in operation, the companies said in a statement.
In a second joint venture, both companies will build another sugar and ethanol mill. Bunge will have 80 percent of this plant and Itochu, the remaining 20 percent, but other details of the greenfield project were not disclosed.
"With these two projects together, we expect ethanol output capacity to total some 500,000 kilolitres a year," Masanobu Takagi, chief operating officer of Itochu's energy trade division, said in a Tokyo news conference on Wednesday.
Santa Juliana mill would run in full capacity by 2011, when it produces 260,000 kl of ethanol and 180,000 tonnes of sugar per year, he said. It now makes 130,000 kl of ethanol and no sugar.
Brazil is the world's top sugar and ethanol exporter.
This sector has attracted a lot of foreign investment over the last few years amid a boom in local demand for cane-based ethanol since the launch of flex-fuel cars, which can run on any mixture of ethanol and gasoline.
The prospect of rising ethanol exports as more countries adopt the biofuel as an alternative to fossil fuel is also attracting foreign investment.
ETHANOL AND SUGAR
Sojitz, Japan's No. 6 trading firm, has already had a 33 percent stake in an ethanol producing company in Brazil with crushing capacity currently at 3.7 million tonnes of cane per year. Capacity is expected to jump to 44 million tonnes by 2021.
"We have plans to discuss with Bunge further business expansion opportunities," Itochu's Takagi said, without elaborating further.
The purchase of Santa Juliana mill was Bunge's first step into Brazil's ethanol industry.
Bunge announced last week it had bought a majority stake in another sugar and ethanol mill in Brazil's center-west region. This plant is expected to become operational in 2009.
Sugar is a focus area as Bunge said in July it would acquire the international sugar trading and market division of Tate & Lyle Plc
The company is a top soybean processor and grain trading house in Brazil, with an annual turnover of 22.5 billion reais ($12.3 billion). It also has business in wheat, fertilizers and animal nutrition.
Itochu has teamed up with China's top grains company, COFCO, in an effort to increase purchasing power of grains, dairy products and meat in the international market and separately agreed with Taiwan's Wei-Chuan Foods Corp to together enter the Chinese bread market. ($1 = 1.829 real)