The world’s largest supplier of pulp is preparing for a spike in the cost of the commodity amid surging land prices in Brazil.

Pulp makers face fierce competition with other agricultural producers, prompting Suzano SA to search for “new frontiers” to plant eucalyptus trees and harvest wood, Chief Executive Officer Walter Schalka said in an interview.

“I don’t think the price of pulp in the next 10 years will be the same. It will be higher,” Schalka said ahead of his company’s 100-year anniversary on Monday. “Agribusiness has grown at a very fast pace. Technology also increased and allowed products like soybeans and corn to enter areas in which they weren’t competitive in the past.”

Demand for pulp is growing because the world is increasingly using the kind produced in South America. The region’s eucalyptus-based product is entering new niches, such as absorbent products like diapers that were previously exclusive to more premium fiber harvested from trees in the Northern Hemisphere. Today no other country in the world ships more pulp overseas than Brazil.

Suzano’s data show a 62% increase in the price of land in Brazil in the past five years. That also increased the price of wood, which almost doubled in the period, the company said.

Suzano expects to continue planting about 1.2 million eucalyptus trees a day, the most ambitious level in its history. Meanwhile it is looking at expanding to areas that currently are not used for tree planting but now might be.

Such a strategy has the potential to create a frenzy around eucalyptus plantations recently witnessed in Mato Grosso to Sul. The midwestern Brazilian state mostly known for cattle breeding hosts two pulp mills and a new Suzano unit is planned to start as soon as June. The region was also chosen by Chile’s billionaire Angelini family for a $3 billion investment in a mill to be inaugurated in 2028.

Source: Bloomberg