Brazil's Sugarcane Technology Centre and Germany's BASF said they will jointly develop a genetically modified sugarcane with yields up to 25 per cent higher than those currently available.

The cane, expected to hit the market within 10 years, will be able to handle drought better than current strains, said Luiz Louzano, biotechnology manager at BASF's local unit.

"Our aim is to develop a cane which can survive in more hostile environments, areas with water limitations. Those characteristics could raise the average cane yield (in Brazil) to 100 tons per hectare, from 80 currently," remarked Mr Louzano.

This is BASF's first step into the development of cane varieties.

The world's largest chemical maker, which invested €1 billion in the past 10 years to set up a gene development programme, signed a deal earlier this year with Monsanto to create the world's first drought-resistant biotech corn.

It now expects to introduce some of these genes in conventional cane varieties developed by CTC, which was created in 2004 from Brazil's Copersucar and has been a world leader in cane research.

"Our role is to research and validate new genes and look for partnerships with the best seed makers," said Mr Louzano.

The variety is expected to benefit mainly new cane frontiers such as the west of Sao Paulo, Triangulo Mineiro, in Minas Gerais state, and Brazil's centre-west states.

Cane planting has been expanding rapidly in these regions, which are usually drier and have poorer land than traditional cane-producing areas like Ribeirao Preto and Piracicaba, in the state of Sao Paulo, where yields are the world's highest.