Center-South Brazil H1 August sugarcane crush up 31.6% on year: survey
The sugarcane crush in the key Center-South region of Brazil is expected to total 44.32 million mt in the first half of August, an increase of 31.6% on the year, an S&P Global Platts survey of analysts showed Thursday.
The large increase over last year was due to heavy rains in the first half of August 2018 that impacted the harvesting rate, resulting in an average loss of almost five days of crushing activity.
Analysts surveyed by Platts said 0.8 day of disruption in crushing was due to rain during the current reporting period.
Industry association UNICA is expected to release its official production figures in the coming days.
If the data confirms the estimate, it would take the cumulative cane crush between the start of the season on April 1 and August 31 to 350.49 million mt, an amount 11.34 million mt more than the prior year cumulative cane crush.
Of the 13 analysts surveyed, two large producers estimated the total cane crush would be between 42.5 million mt and 45.2 million mt, which is also inclusive of the minimum and maximum ranges provided by analysts surveyed.
The proportion of cane used for sugar production is expected to be 36.84%, up from 35.04% a year earlier. Brazilian producers are expected to continue to favor ethanol production over sugar given the increased profitability of ethanol production over sugar production.
Platts assessed hydrous ethanol ex-mill Ribeirao Preto converted into raw sugar equivalent at 13.34 cents/lb on Wednesday. The front month October NY11 sugar futures contract settled Wednesday at 11.44 cents/lb, proving a 1.95 cents/lb. discount to hydrous ethanol in raw sugar equivalent.
“With sugar still heavily discounted at CS Brazilian ports on increasing stocks and on lower global demand and with relentless ethanol demand at the pump, ethanol continued to pay better than sugar despite a weaker Brazilian real that lost about 18 centavos against the dollar on the period. Therefore, we expect mills to have continued maximizing ethanol production but estimate a very small recovery in the sugar mix to around 37.5% from 37% in H2 July (2.3 percentage points up on the year) because the sucrose content was higher due to drier weather and the seasonal pattern. This could be the peak seen for the fortnightly sugar mix this season below last year’s 38.45% peak hit on H2 July indicating that the sugar mix might end this season at 34.2%, down 1-percentage points on the year,” said Claudiu Covrig, senior sugar analyst with Platts Analytics.
Sugar production was expected to total 2.247 million mt in H1 August, an increase of 31% year on year. If this estimate proves correct, it would mean cumulative sugar production of 15.508 million mt.
Total ethanol output from sugarcane is expected to be 2.391 billion liters, an increase of 22% year on year.
Hydrous ethanol output was expected to be 1.62 billion liters, according to the average of the analysts’ responses to the survey. This would be an increase of 20.9% on the year. Anhydrous ethanol output in H1 August was expected to be 769 million liters, an increase of 23.4% year on year.
Strong consumer demand for hydrous ethanol at the pump has been supporting hydrous ethanol prices. The ethanol to gasoline price parity at the pump still favors ethanol consumption, especially in the larger states such as Sao Paulo. Platts assessed hydrous ethanol ex-mill Ribeirao Preto at Real 2,120/cu m on Wednesday, 18% higher year on year.
“With cumulative hydrous production lagging for a year while demand remains relentless, hydrous prices will remain firmer from a year ago. Prices might even have to reach higher to cap demand. At the current pace, carry-over stocks should be worth less than 15 days of consumption,” said Platts Analytics Senior Biofuels Analyst Beatriz Pupo.