Much of this year's crop will be distilled into fuel for motor vehicles instead of made into a sweetener for biscuits, soft drinks and coffee.

Production at this plant starts in April from the new sugar cane crop in Brazil's Sao Paulo state, the kingdom of cane in the world's top producer of sugar and the clean-burning ethyl alcohol fuel. Other plants in the state are already running.

The air, dampened by heavy rains, hung with a cloying aroma like burnt molasses. Towering smokestacks belched thick clouds into the gray sky. Yet the look and smell of heavy industry was deceiving.

The funnels emitted steam, not hydrocarbons. And the mill, surrounded horizon to horizon by rolling fields of grassy cane, is producing 160,000,000 liters a year of a renewable fuel to help Brazil break its reliance on imported petroleum products.

ETHANOL COMES FIRST NOW

Initially, Usina MB and neighboring plants will produce mostly ethanol, to meet demand pent up from the off season. Operations will gradually adjust to perhaps 50-50 ethanol and sugar crystals, then tip toward sugar.

"Until April 30 the proportion will be 62-65 percent ethanol and the balance sugar," said analyst Plinio Mario Nastari, president of Datagro in the city of Sao Paulo.

With Brazil using more ethanol to power vehicles, directly or blended with gasoline, processors like MB are prepared to produce sugar and ethanol simultaneously.

Depending on market prices and projected commercial needs, concentrated cane juice can be piped after crushing either to the sugar factory or to fermentation vats.

At the sugar factory, cane is crystallized into raw sugar. In the fermentation vats, yeast will be added to create "wine" that is diverted into 60 foot high tanks, or columns, for final distilling into ethanol.

"The mill is always watching the trends of the market," said Cicero Junqueira Franco, a board member at the mill and a director at Vale do Rosario, which owns 50 percent of the plant.

A silver haired patriarch of one of Brazil's close knit sugar families, Junqueira was an architect of the national craze for ethanol in the 1970s. Demand ebbed by the end of the '80s when oil prices were low and sugar growers were saddled with debt.

"According to the trends they make some deals before the harvest and plan how the production will be," he said through a Reuters translator. "Many times this anticipated sale brings money to finance the harvest."

Raw sugar futures in New York reached a 25-year high last month at almost 20 cents a lb. In 2005, Nastari estimated, 51.1 percent of the cane went toward ethanol in Brazil. This year's prices are an incentive to produce more sugar.

He predicted that by 2013, the proportion of Brazil's sucrose going to sugar would fall to 41 percent. Domestic ethanol prices reached a record 1.50 real per liter in the beginning of March.

Brazil blends domestic gasoline with 20 percent ethanol. Last month the government reduced the ethanol content from 25 percent in an effort to keep domestic prices from rising due mainly to the strong sales of flexfuel cars.

Three quarters of new cars now sold in Brazil are flexfuel, meaning they can run on any combination of ethanol and gasoline.

"Ethanol can replace oil and Brazil still imports oil," Junqueira said.

"The great opportunity for growth is the international market for two reasons. One is ethanol replacing oil ... and the other is the environmental issue," he explained.

GREEN EFFICIENCY

Usina MB is a model of environmental efficiency. During crushing, fibers are stripped from cane stalks and burned to create steam that generates electricity. The plant's 15 megawatts of capacity is enough to power all its industrial facilities, offices and laboratories. There is an 8 MW surplus to sell to the grid, enough to light some 29,000 homes.

Excess fiber, known as bagass, can be used to feed cattle and fertilize cane fields.

Vinhaca, the swill left over from the fermentation process, was once dumped in rivers, where its potassium content killed fish. Now it is used as a potent fertilizer for cane.

"Every time I find something wrong, I see people working out a solution," said Nastari.

The traditional method of manual harvesting after burning cane takes a toll on field labor. Much of the cane observed around MB was neatly cut by machines looking something like the large combines common in the US farming areas.

A state law requires 5 percent annual growth in mechanical harvesting. In 15 years all manual cutting will be phased out in Sao Paulo.

Social policy must deal with displaced cutters, who are poor with limited skills and education and depend on the US$600 or so they earn per month in the fields during harvest.

Work at the mills can be dangerous. Last year ten workers were killed when a boiler exploded at nearby Vale do Rosario, one of the largest mills in the country.

Nastari viewed the field burning as less an environmental issue than a missed opportunity to use the cane tops, leaves and fibers more efficiently to produce energy and reduce the cost of production.

Production of ethanol and sugar consumes more carbon than it produces, and by selling carbon credits to polluters in the emission markets, mills can further cut sugar costs.

"Brazil is serving as a demonstration for undeveloped or less developed countries that are producing sugar cane," Nastari said.