Sugar Mills Tackle Rising Diesel Prices: Inventory, Procurement Strategy, and Cost Reduction

Recently, international oil prices have reached their highest levels since 2022. This surge in crude oil, primarily triggered by actions involving the United States, Israel, and Iran, is creating a ripple effect. Impacts on diesel and fertilizer prices, for instance, are being felt, causing operational instability for sugar-energy companies. Paulo Bruno Craveiro, a senior analyst at Datagro, emphasizes the need for a 'cool head' when negotiating the fossil fuel used in agricultural machinery. He recalls, 'We have a recent example from the Ukraine war, where there was desperation to buy and stock inputs, and the mills that made more abrupt moves in fertilizer acquisition ended up suffering greater losses.' According to him, there is no risk of product shortages, stating, 'This is already clear, there's no need to fear. It's about knowing how to manage these purchases.' Tânia Pires Holzhausen, a member of the administrative council at Água Bonita mill, indicates that the company employs diesel stocking strategies. As the sugar-energy plant has already commenced its harvest season, halting operations would have a significant financial impact. She explains, 'Our buffer is small, so we seek to stock up because our price in the purchasing pool [collective acquisition strategy for large volumes] is already very well aligned. We sought a way to have a larger buffer so that we don't stop, because stopping still costs more than the increase in diesel.' Furthermore, the administrative superintendent also highlighted the importance of other cost reduction measures.